Trump's Fed pick is a dove. How Miran could move the market.

Mint

3 days ago

Wall Street shrugged at President Donald Trump's plan to nominate his economic adviser, Stephen Miran, to the Federal Reserve.
The immediate market reaction to Thursday's announcement was muted, but investors now must factor in another White House-aligned voice pushing for rate cuts and a lighter regulatory touch inside the central bank.
Miran, who is chair of the White House Council of Economic Advisers, is slated to complete the term of Fed Gov. Adriana Kugler, whose surprise resignation became effective on Friday. She joined the Board of Governors in September 2023; her term expires at the end of January.
The Senate probably won't vote on the Miran nomination before the Fed's September policy meeting. So, the real significance for markets lies in what comes after September.
'This could be the first domino in a sequence leading to looser policy, inflation above target, and a weaker dollar," wrote Daniel Altman, founder of High Yield Economics, in a note.
Miran has repeatedly called for a weaker dollar. In a 41-page essay on international trade, published by Hudson Bay Capital last November, Miran maintains that 'the root of the economic imbalances lies in persistent dollar overvaluation that prevents the balancing of international trade…."
A former senior strategist at Hudson, Miran goes on to lay out what he describes as tools for reshaping global trade and the world's financial systems. A key tool, he wrote, is devaluation of the greenback, done by the Fed's ability to create money supply.
'Flooding the market with dollars, thus lowering short-term interest rates and causing higher inflation, would be one way to achieve Miran's goal," said Altman, 'and only the Federal Reserve has the tools to do it."
Miran was a hawk who turned into a dove, now arguing that tariffs don't lead to inflation and who has repeatedly criticized Fed Chair Jerome Powell for his reluctance to ease monetary policy.
In the past, Miran proposed nationalizing the regional Federal Reserve Banks and making all board members at-will employees who the president can fire at any time.
In the near term, Wall Street analysts don't see a major policy pivot at the Fed.
'Miran's appointment will do little to change policy on the margin in the near-term but it does add another dovish voice to the fray," wrote economists at 22V Research.
Two Fed governors, Christopher Waller and Michelle Bowman, dissented during the central bank's July policy meeting, advocating for a quarter-point rate cut.
There may be, however, 'an element of testing Waller's, and to a lesser extent Bowman's, dovish commitment if Miran is willing to always go one step beyond them in pushing for lower rates," the 22V economists wrote.
Miran 'could speak a lot publicly, supporting the president and perhaps openly undermining Powell, but it will be hard for him to move the policy needle," said analysts at Capital Alpha Partners. 'The Fed isn't set up in a way that provides one governor that much influence."
The timing of Miran's confirmation is also a market variable.
'Getting Miran approved by the Senate after it gets back from recess on September 5 but before the next FOMC meeting starts on September 16 would be a Herculean task," wrote Michael Feroli at JPMorgan. But, 'In the off chance Miran is governor by the time of the next meeting, that could imply three dissents. That's a lot of dissents."
Assuming that Miran is approved by the Senate, Feroli expects the Fed to cut rates by a quarter point at each of its next three meetings.
Miran's nomination is part of a larger push by the White House to reshape the role of the Fed.
Personnel is policy—as the Reagan-era line goes—and analysts think that may be the best way to think about Trump's approach.
Luis Alvarado, a global fixed income strategist at Wells Fargo Investment Institute, called Miran's nomination a 'strategic move by the Trump administration to advance its economic agenda while also maintaining flexibility for future appointments."
The upshot is that investors are now staring at a new vote for cheaper money and a friendlier stance on regulation, factors that could influence the size and pace of cuts, the path of the dollar, and how banks are supervised.
Write to Nicole Goodkind at [e-mail]