“We have to recognize that there is some difference now from where we thought a week ago,” before China announced new restrictions on exports of rare earth minerals crucial for high-value manufacturing, Miran said at the CNBC “Invest in America Forum” in Washington.
“There is more downside risk now than there was a week ago, and it is our job as policymakers to recognize that this needs to be reflected in policy… It becomes even more urgent that we quickly move to a more neutral position in policy.” President Donald Trump responded to China’s announcement on rare earths with threats to raise tariffs on Chinese imports to 100%, reigniting a trade war between global economic giants that had threatened to deliver a deep blow to global trade last spring — a threat that has since been averted as tariffs were rolled back and the two sides continued to negotiate.
Beijing’s announcement that it would cut supplies of minerals crucial for high-tech consumer and defense products meant that “risks now exist that did not exist a year ago,” Miran said. Treasury Secretary Scott Bessent said in remarks at the same forum that the US and China continued to talk. The Fed cut rates by a quarter of a percentage point last month and is expected to do so again at its October 28-29 meeting, pushing the policy rate to the 3.75%-4.00% range. Miran, who was on leave as head of the White House Council of Economic Advisers, argued for a larger cut of half a percentage point at last month’s Fed meeting. He said his prospects for lower inflation in the coming months remain, and reiterated that he believes current U.S. monetary policy is too restrictive.
“I’m less concerned about upward inflation in the near future, which then gives us the flexibility and freedom” to cut rates more quickly, Miran said.
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