St. Louis Fed’s Musalem says another rate hike needed soon
St. Louis Fed President Alberto Musalem said the US central bank will likely need to raise interest rates again soon, arguing current policy remains too accommodative to bring inflation back to target.
Speaking in prepared remarks to the Shadow Open Market Committee, Musalem said inflation remains elevated and is unlikely to fall further without additional central bank action. He said moving earlier on rates lowers the risk of broader economic damage, and favored gradual adjustments over abrupt moves.
Musalem described financial conditions as only slightly tighter and still accommodative overall, saying restoring price stability should be the priority. He linked elevated long-term bond yields partly to expectations that policy rates will rise further.
He noted the broader economy and labor market remain robust, with third-quarter data confirming underlying strength, while inflation expectations have stayed steady. Still, he said risks are tilted toward inflation staying elevated. His remarks echoed earlier comments from Richmond Fed President Thomas Barkin, who also backed a gradual approach to tightening.
Musalem’s comments add to a Fed rate hike debate that matters for the US dollar and US Treasuries: officials signaling more tightening tend to support the dollar and push bond yields higher, while any shift toward a softer stance would have the opposite effect across major currency pairs and rate-sensitive assets.
Source: FXStreet