Persistent underperformance in inflation data has further revealed diverging views within the Federal Reserve regarding the interest rate path. Fed Governor Milan, considered a "hawkish dove," stated that he has raised his projection for the year-end policy rate but still believes it is necessary to implement interest rate cuts this year.

Milan, speaking at an event in New York, indicated that due to recent disappointing inflation figures, he has increased his year-end policy rate forecast by 50 basis points. He clarified that this adjustment was not driven by oil prices or conflict with Iran, but was based solely on the latest inflation data received. He described the revised interest rate path as now being closer to a "neutral level."

Despite this upward revision, Milan maintains a relatively accommodative view of the current monetary policy stance. He cast a dissenting vote at the March 18th policy meeting, advocating for a 25-basis-point rate cut instead of holding rates steady. During that meeting, Fed officials collectively acknowledged that uncertainties stemming from the Middle East situation are increasing, while also emphasizing that further evidence of declining inflation would be necessary before resuming rate reductions.

Although he has raised his estimate for the terminal rate, Milan still believes that cumulative rate cuts totaling approximately one percentage point this year are appropriate. The goal, he stated, is to return the policy rate to a "neutral range" that neither stimulates nor restrains the economy. He expressed the view that the current economy does not require monetary policy to "step on the accelerator" to boost growth, but neither should policy continue to act as a drag. According to him, the current policy rate remains slightly restrictive and continues to exert some inhibitory pressure on economic activity.

Analysts suggest that Milan's comments reflect the ongoing internal Fed debate between concerns over "sticky inflation" and signs of "economic slowing." While some officials remain cautious about cutting rates, a weakening labor market and slowing economic momentum continue to provide room for a potential policy shift within the year.