A Dovish Fed Official Tightens the Path to Rate Cuts as Energy Prices Elevate Inflation Risks

A key inflation measure is expected to remain at 3.2% as of March, above the Federal Reserve’s 2% target. Stephen Miran, one of the central bank’s most dovish policymakers, said Thursday that he has scaled back his rate cut projections in response to inflation dynamics that have become “a little bit less favorable.”

Miran, who had previously projected six rate cuts by the end of 2026, now sees only three or four. He cited energy price increases from the Iran conflict as a growing inflation risk, altering the balance of risks in the Fed’s outlook. Despite this, he still supports a rate cut at the April meeting, citing a slowing labor market.

Miran expects inflation to return to near-target levels within a year, assuming the energy shock is temporary. John Williams of the New York Fed warned that a prolonged conflict could cause broader supply shocks and persistent inflation. Rising energy prices are already feeding into inflation, and the trajectory of price pressures will depend on how long the conflict lasts.

A swift resolution could ease inflationary pressures. A prolonged war could trigger a broader supply shock, keeping inflation elevated for longer than expected.