Two Fed officials who rarely agree both say inflation will not be a problem going forward

By Greg Robb Fed officials are struggling to find the interest-rate policy that best balances concerns about inflation with worries over a sluggish labor market Fed governor Stephen Miran, at left, and New York Fed President John Williams say they are not worried about inflation. Two top Federal Reserve officials - one a more populist outsider and the other at the ideological center at the central bank - find themselves in agreement on at least one issue. Higher inflation is not going to be a problem for the economy in the coming months, they say. New York Fed President John Williams, a close ally of Fed Chair Jerome Powell and a career economist at the central bank, and Stephen Miran, who is a close adviser to President Donald Trump, himself a fierce critic of Powell, both indicated this week that they're confident inflation will cool in coming months. Miran was Trump's pick for a several-month stint on the Fed board of governors while the president and his top advisers complete a search for a replacement for Powell, whose term as chair ends in May. The comments come as Fed officials struggle to find the interest-rate policy that best balances concerns about inflation with worries over a sluggish labor market. Rising prices continue to have Americans on edge. At the same time, employers have dramatically slowed their hiring over the past several months in the face of uncertainty about the economic outlook. Miran, in a speech and a subsequent television interview, said government statistics are misleading and "underlying" inflation is running below 2.3%, not far from the Fed's 2% target. He said the official measure of inflation, at a rate of 2.8%, is being overstated by housing inflation that is still feeling the effects of the pandemic, and also by how statisticians measure financial advisory fees when the stock market goes up. "Quirks in the statistical measurement process" shouldn't cloud the Fed's view on inflation, he said. In a separate speech, Williams was also upbeat about the outlook for inflation. While tariffs boosted prices this year, Williams said the impact was "more muted and drawn out" than he expected. He said he didn't see any signs of spillover effects from tariffs to other prices. "In particular, no broad-based supply-chain bottlenecks have emerged, shelter inflation has declined steadily, and measures of wage growth point to a continued gradual slowing," Williams said. "This is consistent with reports around the [New York] district, where several of my business contacts have noted that, while tariffs continue to drive up their input costs, the pace of price increases has eased slightly," Williams said. The New York Fed president predicted inflation would drop to just under 2.5% next year before reaching the Fed's 2% target in 2027. Inflation hasn't been at or below the Fed's target since early 2021. Williams said he expected tariffs to have a "largely one-off" effect on price levels. Miran agreed in principle but said he was not convinced tariffs had boosted core-goods inflation at all. Last week, the Fed cut interest rates by a quarter percentage point for the third straight meeting due to concerns about the softening job market. There were three dissents. Miran wanted a half-percentage-point cut, while two other officials wanted the Fed to leave rates unchanged because of concerns that inflation was too high. Cleveland Fed President Beth Hammack, who will be a voting member of the Fed's interest-rate committee next year, said she favored a higher rate. The two officials differ on the outlook for interest rates Miran and Williams differ on what low inflation means for interest-rate policy. In his remarks, Miran advocated for more rate cuts, saying that the labor market has been on a weakening trend that predated the Trump administration and that lower rates were needed. If the Fed doesn't continue to cut rates, "we will be in a really bad spot in 2027, because inflation will be down towards our target and the labor market will be quite a bit weaker because we kept policy too tight," he said. Williams said he thought the unemployment rate would peak at around 4.5% and gradually come down over the next several years. He didn't commit to any changes in rates, saying monetary policy was "well positioned" going into 2026. -Greg Robb This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal. (END) Dow Jones Newswires 12-15-25 1510ET