St. Louis Fed’s MUSALEM says more hikes may be needed for 2% inflation
St. Louis Fed President MUSALEM said the Fed will likely need additional rate hikes to bring inflation back to 2% and that policy must tighten further within a 'timely' horizon. He suggested if the horizon is ~18 months, rates may need to rise again over the next 6—9 months.
St. Louis Fed President MUSALEM said the Fed will likely need additional rate hikes to return inflation to 2% and that policy will need to tighten further to reach the target within a 'timely' horizon. He said if 'timely' is taken to mean roughly 18 months, rates may need to be raised again at an appropriate point over the next 6—9 months. MUSALEM said inflation remains the main US economic problem, but strong growth and a stable labor market suggest the Fed could bring inflation down without materially hurting employment.
On the Oct. 27—28 FOMC meeting, he said he is open and has not pre-judged the outcome, but inflation dynamics still warrant continued consideration of further tightening. Despite a notable rise in US Treasury yields, he said financial conditions remain accommodative and supportive of growth, adding that higher yields reflect expected higher real rates and increased capital competition amid a strong economy rather than a loss of confidence in the Fed.