Federal Reserve Governor Stephen Miran — who has dissented in favor of rate cuts at every meeting since his appointment by President Donald Trump last year — said Monday that the Iran-driven oil shock does not alter his policy outlook, arguing the Fed should wait for clearer evidence before assessing the inflation impact of higher energy prices.

“I think that we shouldn’t be making policy based on short-term headlines,” Miran said Monday during a Bloomberg interview.

“It’s just still premature to have a clear view about what this is going to look like as you look 12 months out.”

Should The Fed Look Through An Oil Shock?

Since the start of the war in Iran, oil prices — as tracked by the United States Oil Fund ( USO ) — have rallied nearly 40%, fueling fears of an upcoming inflationary wave.

“These oil shocks have been things that this Fed has looked through for a long time,” Miran said.

“It would be highly unusual for the Fed to start looking through them now.”

Traditional central banking holds that oil shocks hit headline inflation hard but pass through to core inflation only weakly, and that central banks should look through the first-round effects unless two specific conditions emerge: inflation expectations beyond the first year start to rise, or wages begin responding to higher energy prices in a way that creates a self-reinforcing spiral.

Miran said he sees neither.

But financial markets are sending a different signal. Prediction markets now put a 34% probability on zero Fed rate cuts in 2026 — a figure that has risen 19 percentage points in recent weeks — while the probability of an outright rate hike has climbed to 25%.

The chance of March inflation printing at or above 3.4% stands at 49%.

At the March FOMC meeting, the Fed's updated Summary of Economic Projections showed a median expectation of just one rate cut in 2026, alongside a higher inflation outlook, with headline inflation revised up to 2.7% from 2.4% in December.

Rate Cuts: Why Miran Still Holds A Four-Cut Outlook

Miran entered the March FOMC meeting projecting four rate cuts for 2026 — down from six in his December Summary of Economic Projections — after trimming his outlook in response to inflation data received between the two projection periods.

He said Monday that the oil shock has not moved that baseline, but acknowledged that the balance of risks around it has deteriorated on both sides.

“The balance of risks does change, but I think it’s actually changed on both sides equally,” Miran said.

“The inflation risks have gotten a little more concerning, but the unemployment risks have gotten more concerning too — because the negative supply shock that is oil prices is also a negative demand shock. You’re taking money out of goods and services that are not energy.”

That framing — an oil shock as simultaneously inflationary and recessionary — is the core of Miran’s argument for holding course. Higher energy costs redirect consumer spending away from discretionary goods and services, depressing demand and nudging unemployment higher.

That demand destruction, in his view, partially offsets the headline inflation impulse and argues against tightening.

Chicago Fed President Austan Goolsbee, said separately on Monday that a circumstance could arise requiring rate hikes.

Miran pushed back sharply — not on the logic, but on the analogy.

The 2021–22 oil shock, driven in part by the Russia-Ukraine invasion, reverberated through the economy because monetary and fiscal policy were at historically accommodative extremes — the Fed was purchasing $120 billion in assets per month and the federal government was deploying $2 trillion fiscal packages simultaneously.

That combination allowed the energy shock to ignite a broad-based inflation that took two years to suppress.

That condition does not exist today. “We’re not hitting the gas on demand,” Miran said.

“We’re not boosting demand with all-time record accommodative policy in a way that would allow these prices to reverberate through the economy.”

The Two Conditions That Would Change Miran’s View

The first is medium-term inflation expectations breaking higher. Miran said five-year forward inflation expectations in CPI swap markets have actually been declining lately — no evidence of de-anchoring beyond the immediate horizon. First-year expectations have risen, but that is a first-round effect the Fed traditionally accepts.

The second is a wage-price spiral. Miran said wage pressures have been declining on a “steady, steady, steady basis” for several years and that the labor market is “just not strong enough to worry about it.”

That is precisely why he dissented at the last meeting in favor of a 25 basis point cut — and has dissented at every preceding meeting on the same grounds.

If either condition materializes in the data, Miran indicated his outlook would shift.

Until then, four cuts remain his base case.

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