Federal Reserve Governor Milan: February non-farm data strengthens the case for rate cuts, soaring oil prices are a "one-time shock" not fearing inflation.

Federal Reserve Board Governor Milan said on Friday that the weak February nonfarm payroll report further strengthened the central bank's case for further interest rate cuts. In response to the US Labor Department's announcement on Friday that the number of nonfarm jobs in the US decreased by 92,000 in February, Milan stated in an interview that the Fed should focus more on supporting the labor market rather than worrying about inflation. He said, "I don't think we have an inflation problem. I think the labor market needs looser monetary policy. And I think taking a slightly tighter monetary policy stance rather than a neutral stance is not appropriate. I think being close to a neutral stance is the right approach." Currently, the Fed's key interest rate target range is 3.5% to 3.75%, and the Fed has already cut interest rates by 25 basis points three times in the second half of 2025. If Milan's idea is realized - keeping interest rates close to a neutral level, he believes that the neutral level is about one percentage point lower than the current level. The consensus among Fed officials at the December meeting was that the neutral level - neither inhibiting nor stimulating the economy - is around 3.1%, which means there may be two more rate cuts. Milan has always believed that persistently high inflation data depends more on how the US Department of Commerce and Labor measure inflation than on real underlying pressures. One factor he mentioned is portfolio management fees, which have increased as the stock market has risen. Portfolio management fees are typically charged as a percentage of assets, so when the market goes up, even if the actual fees for these services do not change, the dollar value of these fees increases. Milan also added that recent surges in oil prices and the corresponding rise in gas station costs related to the conflict with Iran are not worrisome. He said, "In general, the Fed would not make such a big response to rising oil prices. Rising oil prices will push up overall inflation, but this is often a one-time shock. Core inflation (excluding energy prices) is a better predictor of medium-term inflation trends than overall inflation." Since President Trump nominated Milan to the Federal Open Market Committee in September last year, Milan has voted against at every FOMC meeting he attended. For the three rate cuts, he preferred a larger cut of 50 basis points rather than the committee-approved 25 basis points. In January this year, when the FOMC voted not to cut rates, Milan expressed his desire for a 25 basis point cut. When asked if he would vote against again, he said, "I hope not, but it depends on my colleagues. I hope we vote to cut rates." Milan was appointed to serve out the remainder of Adriana Kugler's term, who resigned in August 2025. The term expired in January this year, but Milan continued to serve until his successor was approved. Trump nominated Kevin Walsh to be Chairman of the Fed, a position that will eventually succeed current Fed Chairman Powell, whose term expires in May. Milan said, "I will attend the meeting in a few weeks and take it step by step after that."