Federal Reserve Bank of St. Louis President Alberto Musalem said policy should remain “modestly restrictive” until it’s clear inflation is on track to the central bank’s 2% target, and that he sees increased risks that progress may stall or even reverse.
St. Louis Fed President Alberto Musalem highlighted an elevated risk of inflation stalling above the central bank's 2% target. He advocates for maintaining a "modestly restrictive" policy until inflation shows consistent downward progress. Musalem's baseline scenario envisions inflation moving toward the target with a solid labor market, though he acknowledges higher risks of inflation stalling or rising compared to labor market weakness. The Fed recently kept rates steady, signaling a cautious approach, while considering potential impacts of policy changes on inflation. Recent data showing January inflation increases support this cautious stance, despite challenges in interpreting seasonal effects. Musalem emphasized a solid labor market and positive growth prospects, underscoring the need for continued policy vigilance.
