- The economy is pretty strong right now, best thing Fed can do is lower inflation
- Contacts mostly worried about inflation, does not see job market worries
- Current level of inflation requires Fed to think about rate increases
- Goes into all meetings with an open mind
- To bring inflation back to target more monetary policy firming will be required
- Market inflation expectations remain anchored, doesn’t see Fed credibility questioned
- Nominal yields rising because real yields rising in part due to rate expectations
- There is a risk consumer vigor could wane
- Job market is overall balanced and stable, no need to cool job market to get inflation down
St. Louis Fed President Alberto Musalem says more monetary policy firming will be required to bring inflation back to target.
He said the economy is pretty strong right now and that the best thing the Fed can do is lower inflation. The current level of inflation requires the Fed to think about rate increases, he said, though he goes into all meetings with an open mind.
Musalem described the job market as overall balanced and stable and said there’s no need to cool it to get inflation down. His business contacts are mostly worried about inflation rather than employment. He did flag a risk that consumer vigor could wane.
On markets, he said inflation expectations remain anchored and he doesn’t see the Fed’s credibility being questioned. He attributed the rise in nominal yields to higher real yields, driven in part by rate expectations.
The comments put him at the hawkish end of the committee, in contrast with the more patient tone from New York Fed President John Williams and Vice Chair Philip Jefferson last week, who hinted that they didn’t want to hike rates again this month.
This article was written by Adam Button at investinglive.com.