Fed's Miran says Trump's deregulation will help lower inflation, justifying rate cuts

WASHINGTON, Jan 14 (Reuters) - The Trump ⁠administration's deregulation ⁠effort will ‍put downward pressure on inflation and is another reason for the U.S. central bank to cut interest rates, Federal Reserve ‍Governor Stephen Miran said on Wednesday.

In comments prepared for delivery to ​an economic forum in Greece, Miran said that while the macroeconomic impact of deregulation is ​hard to measure, the steps taken under President Donald Trump last year and those still to come may eliminate as much as 30% of existing rules on business, and ​lower inflation by perhaps half a percentage point a year.

"The substantial deregulation that has occurred in 2025 will continue over at least the ​next three years and be a large positive shock to productivity that will put downward pressure on ‌prices," he said. "On net, this supports a more accommodative stance of monetary policy."

Not acknowledging those changes means financial conditions will ​be tighter than needed.

If the Fed does not ⁠react to improvements in supply and productivity as they are happening, "then deflation and economic contraction needlessly result ... If the ‌Federal Reserve fails to reduce policy rates in response to deregulation, there will be adverse consequences," Miran said.

"Policy has been tighter than it should have been to reflect ‌significant deregulation lifting potential growth andreducing inflation," he added.

Miran has presented several arguments for rate ‌cuts far more dramatic than those supported by his Fed colleagues, including others appointed by Trump.

Some Fed policymakers acknowledged this week productivity improvements that may be underway, but also ‍suggested it was too early to tailor monetary policy to supply-side developments that may or may not endure, with ⁠an uncertain impact on inflation.

The Fed cut its policy rate by a quarter of a percentage point to the 3.50%-3.75% range at its meeting last month, but is expected to leave it unchanged at its January 27-28 meeting.

(Reporting by Howard Schneider; Editing by Paul Simao)

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