Feds Musalem: Caution warranted in the face of upward inflation pressures
From the original
St. Louis Fed Pres. Musalem is speaking and he says: Fed’s real policy rate is below the long-run neutral rate, longer-term inflation expectations are drifting up, and the labor market remains stable. Fed’s caution is warranted given the risk of renewed upward inflation pressures
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4 itemsFed’s Musalem: Inflation risks remain front and center
Lead — The desk interprets St. Louis Fed President Alberto Musalem's recent comments as a clear signal that inflation risks are becoming increasingly prominent, suggesting a cautious approach from the Fed moving forward. Per the full note [source], Musalem emphasized that while accommodative financial conditions currently outweigh economic headwinds, persistent inflation pressures necessitate vigilance. The Fed's commitment to maintaining a 2% inflation target remains central to its strategy, with Musalem indicating that rates may need to remain stable for an extended period to anchor inflation expectations. This perspective aligns with our view that the Fed is unlikely to pivot aggressively towards rate cuts in the near term, especially given the current inflation dynamics.
St. Louis Fed’s Musalem: Interest rates likely need to rise further to tame inflation
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Fed's Musalem says more monetary policy firming will be required