Stephen Miran’s Vision for a Central Bank Transformation

In a bold move signaling a shift in the U.S. monetary landscape, President Trump has announced the appointment of Stephen Miran to the Federal Reserve’s Board of Governors. This decision comes as Adriana Kugler steps down, opening a critical slot that could significantly influence the Fed’s future direction. Miran, currently presiding as the chairman of the White House Council of Economic Advisors, is known for his unconventional approach to central banking, advocating for deep structural reforms within the Federal Reserve.

An advocate for change, Miran has criticized the current structure of the Federal Reserve, arguing that it has fallen prey to groupthink, leading to significant policy missteps like the inflation surge experienced between 2021 and 2022. His vision, as outlined in a paper co-authored with former Treasury Department senior adviser Dan Katz, suggests a comprehensive overhaul of the Fed’s operations and governance.

One of the key proposals put forth by Miran and Katz is reducing the term length for Fed governors from the current 14 years to eight, while also granting the president the power to dismiss governors. This change aims to inject more accountability and responsiveness into the Fed’s leadership. Additionally, they propose a shift in power dynamics, suggesting that all presidents of the 12 regional reserve banks should have a permanent vote on monetary policy matters. This would decentralize authority and potentially foster a more diverse range of perspectives within the Fed’s decision-making process.

The duo also suggests altering the selection process of regional bank presidents by allowing state governors to appoint the boards of directors of regional Fed banks. These boards, in turn, would select the presidents, bringing a more localized perspective to national monetary policy discussions. Furthermore, they argue for subjecting the Fed’s budget to the Congressional appropriations process, thus ending the Fed’s self-governance over its finances, a cornerstone of its historical independence.

Miran’s approach to central bank independence is particularly noteworthy. He envisions a Fed that retains the freedom to make immediate monetary policy decisions but operates under closer scrutiny and influence from elected officials. This model seeks to bolster the diversity of thought and debate within the institution, emulating the Bank of England’s environment, where policy disagreements are more common and open, according to Miran.

However, implementing these structural changes would necessitate amending the Federal Reserve Act, a move that requires significant political support, including a filibuster-proof majority in the Senate. Despite these challenges, Miran’s appointment underscores President Trump’s appetite for redefining the U.S. monetary framework.

Interestingly, Miran’s ascent to the Fed comes with a touch of irony. While he joins a lineage of former White House Council of Economic Advisors who transitioned to the Fed, such as Alan Greenspan, Ben Bernanke, and Janet Yellen, Miran has previously criticized the notion of a revolving door between the Fed and the executive branch. He has argued for prohibiting Fed officials from taking roles in the executive branch shortly after leaving the central bank, aiming to remove any incentives for Fed officials to curry favor with the sitting president.

This critique seems to have been implicitly aimed at figures like former Fed vice chair Lael Brainard, who joined the Biden White House as director of the National Economic Council in 2023. Despite this, Miran’s tenure at the Fed, which is set to expire in January, may see him returning to the White House, aligning with Trump’s interest in pursuing interest rate cuts.

Miran’s appointment and proposed reforms have sparked a significant discussion about the future of the Federal Reserve and its role in shaping economic policy. As he steps into his new role, the financial community will be closely monitoring how his ideas influence the Fed’s operations and the broader economic landscape.