Federal Reserve Governor Milan talks again about aggressive interest rate cuts may need to be cut by more than 100 basis points this year

The Zhitong Finance App learned that Federal Reserve Governor Milan said that the current monetary policy clearly restricts the economy, and a cumulative interest rate cut of more than 100 basis points may be required in 2026 to ease the suppression of economic growth.

Milan stated in an interview on Tuesday: “It's hard to say that the current policy is at a neutral level. I think the policy is clearly too tight and is dragging down the economy. Interest rate cuts this year are likely to far exceed 100 basis points.”

Just last month, the Federal Reserve cut interest rates for the third time in a row, but at the same time, it gave a signal that further interest rate cuts in the short term are not infallible. According to the latest interest rate path forecast, policymakers clearly disagree on inflation and labor market prospects, and the 2026 median shows only one rate cut.

Milan's statement contrasts with the judgment that “interest rates are close to neutral” recently released by some officials. Richmond Federal Reserve Chairman Barkin said earlier on Tuesday that the current interest rate level is “within the estimated range of neutral interest rates,” and quoted the relevant forecast released by the Federal Reserve in December. Minneapolis Federal Reserve Chairman Kashkari also said on Monday that given that economic growth is still resilient, “we may now be very close to a neutral level.”

Currently, the Federal Reserve's benchmark interest rate range is 3.5% to 3.75%. In the neutral interest rate estimates given by 19 policy makers from the Federal Open Market Committee (FOMC), the range ranged from 2.6% to 3.9%, with a median of 3%.

Barkin stressed that future policy requires a fine balance between the Federal Reserve's “dual mission.” “The recruitment rate is low, and no one wants the labor market to deteriorate further; while inflation has been above target for nearly five years, no one wants to see inflation expectations solidified. It's a very delicate balance.”

Notably, Milan has continued to call for more aggressive interest rate cuts since September of last year. At the time, he took a leave of absence from his position as Chairman of the White House Economic Advisory Committee to become a member of the Federal Reserve. His term of office will end this month.