Stephen Miran Nominated as New Fed Governor; JPMorgan Predicts Four Rate Cuts Starting September

TradingKey - On Thursday, following the announcement of Stephen Miran's appointment as an interim member of the Federal Reserve's Board of Governors, JPMorgan released a report forecasting that the Fed will implement a series of four consecutive rate cuts, each by 25 basis points, beginning in September. 

This nomination by President Trump aims to fill the vacancy left by Adriana Kugler, whose term is set to expire in January following her resignation on August 8.

JPMorgan analysts suggest that with this change in personnel, Chair Jerome Powell will now have to consider more than just balancing employment and inflation at the next meeting. 

President Trump had been persistently pressuring Powell to lower interest rates over the past few months. The newly appointed interim board member, Miran, aligns closely with Trump's policy stances. He has publicly stated that there is no substantial macroeconomic evidence that Trump's tariff policies are exerting upward pressure on prices.

JPMorgan anticipates that Miran's participation in the next meeting could further exacerbate the divergences in monetary policy views within the Fed. Governors Waller and Bowman already voted against interest rate cuts in the July meeting, and Miran's presence could add a third dissenting vote, significantly amplifying opposition.

Furthermore, the Fed's decision on interest rates will also hinge on the August employment data. According to JPMorgan, if the unemployment rate does not fall below 4.4%, a more aggressive rate cut might be on the table for the next meeting. Conversely, if the unemployment rate is at 4.1% or lower, which signifies a robust job market, while inflation remains above target, a rate cut could meet resistance from officials focused on inflation concerns.

Last week's non-farm payroll report revealed a sharp decline in job additions for July, considerably below expectations, with significant downward revisions to the data for May and June, sparking concerns about a weakening labor market. Next week, the Consumer Price Index (CPI) will be released, with Bloomberg surveys predicting a decline in July's inflation rate from June's 0.3% to 0.2%.

Based on expectations of easing inflation and worries about job market weakness, the CME's FedWatch tool currently indicates a 91.4% probability of a 25 basis point rate cut by the Federal Reserve in September.

September rate cut forecast, source: CME FedWatch