Trump-Appointed Fed Governor Stephen Miran Highlights Stablecoins’ Impact on U.S. Neutral Interest Rate
Stephen Miran, a Federal Reserve Governor appointed by former President Donald Trump and publicly known in policy circles as Steve, addressed a gathering of economists in New York on Friday, discussing the growing influence of stablecoins tied to the U.S. dollar on the country’s neutral interest rate.
Stablecoins Pushing Neutral Rate Lower
According to Bloomberg’s reporting, Steve noted that the rapid expansion in demand for stablecoins could be exerting downward pressure on the U.S. neutral interest rate. He explained that this trend might require the Federal Reserve to adjust its policy stance carefully to avoid inadvertently slowing economic growth.
Steve described how the surge in stablecoins is pulling strong demand towards U.S. Treasury bills and other highly liquid dollar-denominated instruments, particularly from international investors. This increased demand adds to the supply of loanable funds in the economy. When the supply of lendable money rises, the neutral rate—the interest level that supports steady economic growth without leading to overheating or sluggishness—can gradually decline.
“If the neutral rate is plunging, then the Federal Reserve must respond by lowering its policy rate; otherwise, it risks tightening conditions unintentionally,” Steve cautioned. He candidly referred to the situation as “a multitrillion-dollar elephant in the room for central bankers,” emphasizing that the growing volume of stablecoins is already influencing markets and will continue to do so as adoption expands.
Stablecoin Growth Pressures Interest Rate Benchmarks
Drawing on existing research, Steve indicated that the expanding use of stablecoins could reduce the Federal Reserve’s benchmark interest rate by roughly 0.4 percentage points. This assessment is consistent with his long-standing policy views. Since joining the Fed, he has argued for more substantial and swift rate cuts, contending that the commonly assumed neutral rate is set too high. According to him, keeping rates above the true neutral level risks unnecessarily dampening economic activity.
While Steve previously based most of his arguments on inflation trends and broader economic conditions, the rise of stablecoins introduces a new structural factor. By increasing the supply of money available for lending, stablecoins naturally create downward pressure on the neutral rate over the long term.
“Even relatively conservative estimates of stablecoin growth imply an increase in the net supply of loanable funds in the economy that pushes down the neutral rate,” Steve said. He added, “If neutral is lower, policy rates should also be lower than they would otherwise be to support a healthy economy.”
Steve warned that failing to adjust policy in response to this shift would be “contractionary.” He is expected to leave the Federal Reserve in January when his current term expires.
Crypto Market Suffers as Volatility Hits Bitcoin
Steve’s remarks come amid significant turbulence in the cryptocurrency market. After reaching a near $4.4 trillion total market value on October 6, the crypto sector experienced a 20% decline that erased almost all of the gains made earlier this year.
This downturn was triggered by the sudden liquidation of approximately $19 billion in leveraged positions, which undermined traders’ confidence and left the market directionless. According to data from CryptoQuant, few participants currently expect a robust rebound.
The year had previously seen increased recognition of crypto assets from regulators, major banks, and institutional investors, boosted by President Trump’s earlier efforts to establish the United States as the global center for crypto activity. Bitcoin surged as much as 35% this year alone. However, the total crypto market capitalization now stands lower than when Trump first took office.
Bitcoin’s recent performance has been especially weak—it has fallen 9% in the current week, setting the stage for its worst weekly drop since March. The cryptocurrency also dipped below its 200-day moving average, a critical level watched closely by traders since the 2022 bear market. As of press time, Bitcoin was trading just under $100,000.
Altcoins, which tend to be smaller and more volatile cryptocurrencies, have suffered even heavier losses, underperforming across the board this year.
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