Federal Reserve Governor Milan: Downside risks to the US economy are rising, and the pace of interest rate cuts should be accelerated.

Federal Reserve Board Governor Milan said on Wednesday that the "downside risks facing the US economy are higher than a week ago," and monetary policy should be adjusted accordingly. Milan pointed out that this makes it particularly important to "quickly return the federal funds rate to a neutral level." He stated that it was thought that market uncertainty had significantly decreased, but friction surrounding rare earth trade last week has once again changed the situation. Milan stated that the current trade uncertainty has not directly impacted the US economy, but it could become a key influencing factor on future economic prospects. He added that this new uncertainty does not necessarily mean that the Federal Reserve needs to cut interest rates more significantly than before. Last month, he indicated that the target range for the federal funds rate should be about two percentage points lower than the current 4.00% to 4.25%. Milan emphasized that the independence of the Federal Reserve is "crucial," and the central bank must maintain a non-political image and should not get involved in political issues such as climate change or racial issues. He stated that the core mission of the Federal Reserve is to "maintain price stability and full employment," rather than focusing on market performances such as record high gold prices. Regarding the issue of key economic data being missing due to the US government shutdown, Milan expressed hope that the latest inflation data could be obtained before the October meeting of the Federal Open Market Committee (FOMC). He said, "Policy decisions should rely more on economic forecasts rather than just current data; however, forecasts rely on data." According to the announcement by the Bureau of Labor Statistics (BLS), the September Consumer Price Index (CPI) data will be released on October 24, 2025. Milan expects that the overall inflation rate for the US Personal Consumption Expenditures Price Index (PCE) will fall to 2% within about a year and a half. He also noted that housing inflation is expected to slow down, mainly due to a decrease in immigration and a lag in the "catch-up effect" of housing costs. When discussing the outlook for interest rates, Milan said that although he personally leans towards a more significant rate cut, considering the median forecasts of FOMC members, "expecting two more rate cuts within the year is a realistic expectation." He concluded, "The economic outlook itself has not deteriorated, but the risks have indeed increased compared to a week ago."