No Surprise: Fed's Miran submits resignation from Fed Board with Warsh replacing him
At a Glance
The desk views the resignation of Fed board member Stephan Miran as a pivotal moment that signals a potential shift in the Federal Reserve's monetary policy stance. Per the full note source, Miran's departure, alongside the anticipated swearing-in of Kevin Warsh as the new Fed chair, could lead to a more dovish approach, particularly as Miran has consistently advocated for rate cuts based on his inflation outlook. This sentiment is underscored by Miran's belief that PCE inflation will normalize, especially in the housing sector, which aligns with broader market expectations for a shift in Fed policy. As we approach the May 15 transition, the market is keenly watching for any signals that could influence the trajectory of interest rates and, consequently, the USD's strength.
Full Analysis
What the desk is arguing
The desk frames this as a critical juncture for the Federal Reserve, with Miran's resignation potentially paving the way for a more accommodative monetary policy under Warsh. This change comes at a time when inflation metrics are showing signs of moderation, which could justify rate cuts sooner than previously anticipated.
Miran's consistent dissent for cuts highlights a divergence from the prevailing Fed narrative, suggesting that his exit could lead to a more unified approach towards easing. The market is particularly focused on the implications for PCE inflation, which Miran believes will converge to more typical levels, a view that could influence future FOMC decisions.
Where it sits in our coverage
Our consensus target for USD/EUR is 1.075, with a range of 1.04 to 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26) - citi: 1.12 (Mar26)
This view aligns with jpmorgan and citi, both anticipating a weaker USD as the Fed pivots towards a more dovish stance. However, bofa remains contrary, holding a more hawkish outlook that suggests a stronger dollar in the near term.
How other firms see it
Firms like jpmorgan and citi are aligned in their expectations of a dovish Fed, anticipating that Miran's resignation will facilitate a shift towards rate cuts. Conversely, bofa holds a contrary view, suggesting that inflationary pressures may compel the Fed to maintain a tighter policy stance.
Key currency pairs to watch include USD/JPY, which may react to shifts in Fed policy, and EUR/USD, reflecting the broader implications of the Fed's decisions on global markets.
What the calendar says
With no upcoming events scheduled, the market will be particularly sensitive to any informal communications from Fed officials leading up to the May 15 transition, as these could provide insights into the future direction of monetary policy.
From the original
FOMC board member Stephan Miran has submitted his resignation from the Fed board effective on or shortly before new Fed chair Kevin Warsh is sworn in. Earlier today Miran may have spoken for the last time in his role on the FOMC saying that he believed that the PCE inflation, par
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