More from Fed's Musalem: Baseline is inflation will take longer to come down
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Baseline Outlook is that inflation will take longer to come back down to target. Sees risk that inflation may not converge to target as we would like. There is a scenario where economy might require a rate increase. If we don't see disinflation in the next one – two quarters that
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4 itemsFeds Musalem: Caution warranted in the face of upward inflation pressures
Fed’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.