Core consumer price inflation is at its lowest level since March 2021, Stephen Miran said, which on that measure is almost a complete round trip back to where it was before the pandemic.
The market is pricing close to a full rate rise and the argument for delivering it is that the Federal Reserve would otherwise lose credibility. Miran's answer is that credibility is measured in inflation expectations, and those are at target for as far out as monetary policy can reach.
"You've got people talking about, oh, the Fed will lose credibility if they don't hike, which, given inflation expectations are very well behaved, basically amounts to people will post mean tweets."
Miran sat on the Federal Reserve Board and now works as a strategist at Hudson Bay Capital, which puts him in the unusual position of arguing against a hike his former colleagues are expected to deliver.
The full segment is covered here so you can skip it.
Here are the 5 arguments that matter.
👤 Guest: Stephen Miran, former Federal Reserve Governor and now a strategist at Hudson Bay Capital
🎙️ Host: Carl Quintanilla, who anchors CNBC's Squawk on the Street
🧩 Other segments: Max Kettner, Chief Multi-Asset Strategist at HSBC; Senator Mark Warner of Virginia on AI regulation; and US Energy Secretary Chris Wright from the G20 energy meeting in Houston
📰 Published: 15 September 2026 on the Squawk on the Street feed
🟣 Apple Podcasts | 🔗 Episode page | ⏱️ 4 min
Key Takeaways
He does not think the Federal Reserve should raise rates, and says the case for doing so is reputational rather than economic
His description of what losing credibility actually costs: people will post mean tweets
Core CPI is at its lowest level since March 2021, almost a complete round trip to pre-pandemic levels
Every measure of consumer and personal-consumption inflation is trending down on a three-month annualized basis
The spring inflation was a textbook oil supply shock, which a central bank normally looks through
The rise in long-term yields is all real, and all growth
The New York Fed's term premium measure is slightly below where it started the year, so it is not a fiscal risk premium
Housing is the part of the economy that pays for the better growth outlook
30-year fixed mortgages have been quoted at 7.17%
1. They Should Not Hike
Quintanilla's first question was direct: should they raise rates?
Miran's answer was equally direct. "So I don't think they should raise rates."
He split the case for hiking into two parts, and dismissed the first. On one side are atmospherics, with the market pricing "almost a complete rate hike." Then: "You've got people talking about, oh, the Fed will lose credibility if they don't hike, which, given inflation expectations are very well behaved, basically amounts to people will post mean tweets."
On the other side is the data, which he says has moved the other way. "But at the same time the data have been moving in a better direction."
2. The Core CPI Round Trip
The headline number he leads with is a four-and-a-half-year low. "Core CPI is the lowest level since March of 2021," and "We've almost completely round tripped on that measure back to the pre-pandemic levels. Right? That's monumental."
It is not one measure doing the work. "Every measure of core PCE, headline PCE, CPI, core PCE — they're all trending down on a three month annualized basis."
His reading of what that proves about the spring. "They've been giving you the evidence that what happened in the spring was a classic textbook oil supply shock of the type that the central bank normally would and should look through."
Quintanilla's pushback was that inflation is not at target yet.
3. The Credibility Argument
He traces the market's conviction to one meeting. "The market really got convinced after the Jackson Hole meeting, even though this is a Fed chairman that said I don't want to do forward guidance," and what the market heard was that the Federal Reserve would not tolerate the inflation — which is where the pressure to act to back up the statement comes from.
The test he applies is what is priced, not what is said. "So if you look at inflation expectations, if you look at CPI swaps, they're pretty much at target as far as the eye can see."
The lag argument is what makes that decisive in his view. Of monetary policy: "It doesn't affect the economy until at least a year from now." Beyond that window inflation is "at target as far as the eye can see." His conclusion: "So there is no credibility issue in markets."
What he says the credibility debate actually is. A dispute over interpretation: one person says something, another interprets it a different way, and the argument is about the reading rather than about inflation.
4. A Good Rise in Yields
Quintanilla pushed back with the market's own evidence: the last time the Federal Reserve did not move, long-term yields sold off, and that is where the rise in rates began.
Miran accepted the fact and disputed the reading. "It did." His method is to decompose the move: split long-term yields into a real component and an inflation component, and: "As I said a moment ago, the inflation component has been extremely well behaved. So it's all been an increase in the real component."
Then he splits the real component again. Into expected economic growth and a risk premium for holding longer-dated government debt, the term premium — and "Measures of the term premium have also been very well behaved this year. In fact, the benchmark measure calculated by the New York Fed is slightly below where it was at the start of the year."
The conclusion follows from the two decompositions. "That tells me that the increase in bond yields is all an improvement in economic growth. That's not a bad thing."
His three catalysts for the adjustment: borrowing to fund AI, which he says the market is recognizing will improve growth; oil, the subject of the preceding segment; and Federal Reserve meetings, which prompt investors to turn over portfolios.
The summary he gave of the whole position. "There's no inflation credibility issue because the inflation expectations are well behaved. There's no fiscal credibility issue because the term premium is well behaved." What is left is growth — "This is a good increase in interest rates, not a bad increase in."
5. Housing Pays for It
Quintanilla raised 30-year fixed mortgages quoted at 7.17% over the previous few days and asked whether that pushes people into renting and works against disinflation in shelter costs.
Miran agreed without qualification. "Yes. So absolutely."
His framing is that the improvement is real but uneven. As the growth outlook gets better, "it's doing so in an unbalanced manner," and: "And so you've got huge growth engines coming from, for example, AI and other parts of the economy."
And the bill falls on the rate-sensitive part. "But then there are other parts of the economy that are going to struggle a bit because of the increase in interest rates. And I think housing is one of those."
Bonus Insights
Miran's three catalysts for the bond move were given almost as an aside, and one of them was the previous guest: he credited oil, the subject of Max Kettner's segment minutes earlier, alongside AI-related issuance and the portfolio turnover that happens around Federal Reserve meetings.
He put the Jackson Hole problem on the listener rather than the speaker. The chairman had said he did not want to give forward guidance; what the market heard was a commitment, and the pressure to act came from the interpretation.
Quintanilla's pushback that the long end sold off the last time the Federal Reserve held was the segment's only real disagreement, and Miran conceded the fact immediately before disputing what it meant.
Miran's bottom line is that the Federal Reserve is being asked to raise rates to defend a reputation that the inflation-expectations market says is not under threat, while the bond selloff it is responding to is a growth story that mortgage borrowers, not the central bank, are paying for.
Products, Companies & Tools Mentioned
The New York Federal Reserve's term premium measure (The benchmark he uses to argue the bond selloff carries no fiscal risk premium; it is slightly below where it started the year)
CPI swaps (The market-priced inflation expectations he says sit at target for as far out as monetary policy can act)
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