Federal Reserve policymaker Stephen Miran, previously one of the central bank's most dovish members, has significantly revised his stance on interest rate cuts, signaling a more cautious approach for 2026. In a recent interview, Miran stated that "aggressive interest rate cuts may no longer be appropriate," a sharp reversal from his December projection that the policy rate could fall below 2.25% by year's end.
Miran cited two key factors for his shift: a labor market that has "performed a little better than I expected" and signs of "renewed strength in goods inflation." This new, more hawkish tone from a noted dove aligns with a broader market reassessment led by major financial institutions.
Wells Fargo has explicitly forecast that the Fed is unlikely to cut interest rates before June. The bank's analysis points to stronger-than-anticipated U.S. economic data, particularly the January jobs report which showed payrolls increasing by 130,000 and the unemployment rate holding steady at 4.3%. This labor market resilience, coupled with wage growth stabilization, reduces the immediate pressure on the Fed to stimulate the economy.
While cooling inflation offers progress, Wells Fargo argues it does not justify immediate action. Policymakers require sustained evidence that inflation is moving consistently toward the 2% target, especially with services inflation still elevated. The bank warns that premature rate cuts could reignite inflation risks, leading the Fed to adopt a patient, data-dependent stance.
The market has reacted swiftly to this shifting narrative. Treasury yields have climbed, and expectations for aggressive easing have been pushed further into 2026. The consensus now points to a potential pivot in June, providing the Fed with several more months of economic data to validate its next policy move.
