St. Louis Fed’s Musalem Sees Chance of Rate Increase if Inflation Doesn’t Ease in 1-2 Quarters
Federal Reserve Bank of St. Louis President Alberto Musalem said there is a scenario in which the economy would require a rate increase if disinflation fails to materialize over the next one to two quarters. He said his baseline is that inflation will take longer to return to the Fed's target and that policy appears to be at or below the long-run neutral rate.
Musalem said he no longer viewed an easing bias as consistent with the balance of economic risks at the Fed's last meeting and warned policymakers cannot depend on a potential productivity boom from artificial intelligence to ease elevated inflation. Later, he said the central bank is missing on the inflation side of its mandate.
From the sources (14 posts)
@businessFederal Reserve Bank of St. Louis President Alberto Musalem said policymakers cannot depend on a potential productivity boom from artificial intelligence to ease elevated inflation
@financialjuiceFed’s Musalem: Caution Warranted as Inflation Pressures Persist Caution warranted in the face of upward inflation pressures Risky to rely on higher productivity growth to solve today’s inflation problem AI productivity effects remain incon
@financialjuiceFed's Musalem: My baseline outlook is that inflation will take longer to come back down to target.
@financialjuice🔴Fed's Musalem: There is a scenario where the economy might require a rate increase. If we don't see disinflation in the next 1-2 quarters, that would concern me.
@firstsquawkFED'S MUSALEM: SEE RISKS 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 NEXT 1-2 QUARTERS THAT WOULD CONCERN ME || HIGHER INFL
@financialjuiceFed's Musalem: Looks like Fed policy at or below long-run neutral.
@financialjuiceFed's Musalem: Thought easing bias no longer consistent with risks.
@financialjuiceFed's Musalem: Bond markets are seeing a resilient economy and higher expected inflation.
@financialjuiceFed's Musalem: 3/4 of the yield rise due to the higher expected neutral rate.
@financialjuiceFed's Musalem: 1/4 of the rise in treasury yields is likely term premium.
@firstsquawkFED’S MUSALEM SAID THE RECENT RISE IN TREASURY YIELDS MOSTLY REFLECTS A HIGHER EXPECTED NEUTRAL RATE AND PERSISTENT INFLATION EXPECTATIONS, WHILE BOND MARKETS CONTINUE TO PRICE IN A RESILIENT US ECONOMY. HE ADDED THAT THE FED’S PREVIOUS EAS
@financialjuiceFed's Musalem: The possibility that we would consider an interest rate increase is greater than zero.
@bloombergtvFederal Reserve Bank of St. Louis President Alberto Musalem says he thought the easing bias was no longer consistent with the balance of economic risks at the FOMC's last meeting. He speaks with Bloomberg's Stephanie Flanders
@bloombergtvFederal Reserve Bank of St. Louis President Alberto Musalem says the central bank is missing on the inflation side of its mandate during an interview with Bloomberg's Stephanie Flanders at a central banking conference in Iceland https://t.c