{"id":436633,"date":"2026-08-20T23:40:12","date_gmt":"2026-08-20T16:40:12","guid":{"rendered":"https:\/\/www.swingfish.trade\/blog\/market-news\/feds-musalem-says-hiking-rates-now-could-save-more-aggressive-action-later-436633\/"},"modified":"2026-08-20T23:40:12","modified_gmt":"2026-08-20T16:40:12","slug":"feds-musalem-says-hiking-rates-now-could-save-more-aggressive-action-later","status":"publish","type":"post","link":"https:\/\/www.swingfish.trade\/blog\/market-news\/feds-musalem-says-hiking-rates-now-could-save-more-aggressive-action-later-436633\/","title":{"rendered":"Fed&#8217;s Musalem says hiking rates now could save more aggressive action later"},"content":{"rendered":"<div>\n<ul>\n<li>Strong growth and investment is influencing bond market<\/li>\n<li>Fed credibility is not in question<\/li>\n<li>Fed is focused on making monetary policy independent of fiscal policy<\/li>\n<li>Monetary policy is neutral or accomodative right now<\/li>\n<li>Financial conditions are pretty accomodative here<\/li>\n<li>Number one concern of public is inflation<\/li>\n<li>Businesses are facing high input costs<\/li>\n<li>Super El Nino might be next supply shock<\/li>\n<li>Given current Fed rates, see lower probability of getting inflation to 2%<\/li>\n<li>Hiking rates now could save more aggressive action later<\/li>\n<li>Underlying inflation is between 2.5-3.0%, and it&#8217;s too high and must be lowered<\/li>\n<li>Productivity is seeing a recovery<\/li>\n<li>The best thing the Fed can do for growth is get inflation back to 2%<\/li>\n<li>Forward guidance is useful when rates are at zero<\/li>\n<li>Forward guidance suggests committment, communicating a framework is different<\/li>\n<li>When you have supply shocks, you have to look at core inflation<\/li>\n<li>Won&#8217;t prejudge upcoming FOMC meeting<\/li>\n<\/ul>\n<p class=\"isSelectedEnd\">St. Louis Federal Reserve President Alberto Musalem maintained his hawkish stance in an interview with CNBC, arguing that inflation remains the primary challenge facing policymakers and suggesting that rate increases could ultimately reduce the need for more aggressive action later.<\/p>\n<p class=\"isSelectedEnd\">Musalem said recent strength in economic growth and investment activity is influencing bond markets, pushing back against concerns that higher long-term yields reflect a loss of confidence in the Federal Reserve. He stressed that the Fed&#8217;s credibility remains intact and that policymakers are committed to conducting monetary policy independently from fiscal policy considerations.<\/p>\n<p class=\"isSelectedEnd\">Musalem argued that monetary policy is currently neutral to accommodative and that broader financial conditions remain relatively easy. In his view, this backdrop raises questions about whether inflation will continue to move sustainably toward the Federal Reserve&#8217;s 2% target.<\/p>\n<p class=\"isSelectedEnd\">He highlighted inflation as the public&#8217;s primary concern, noting that businesses continue to face elevated input costs. He also pointed to the possibility of a future weather event (super\u00a0El Ni\u00f1o) as a potential source of new supply-side inflationary pressures, highlighting the risk that fresh shocks could complicate the disinflation process.<\/p>\n<p class=\"isSelectedEnd\">Musalem estimated that underlying inflation is currently running between 2.5% and 3.0%, well above the Federal Reserve&#8217;s goal. Given the current level of interest rates, he said the probability of inflation returning to 2% may be lower than the Fed would like. <\/p>\n<p class=\"isSelectedEnd\">He also noted that productivity growth appears to be improving, a development that could help support the economy over time. However, he argued that the single most important contribution the Federal Reserve can make to long-term economic growth is restoring price stability and bringing inflation back to target.<\/p>\n<p class=\"isSelectedEnd\">On communication strategy, Musalem said forward guidance is most useful when interest rates are near zero, where policy commitments can provide additional accommodation. He distinguished between committing to a future policy path and communicating a broader policy framework, suggesting the latter remains an important tool for central banks.<\/p>\n<p class=\"isSelectedEnd\">Regarding supply-driven inflation risks, Musalem said policymakers must focus on core inflation measures when assessing the persistence of price pressures, rather than reacting solely to temporary supply shocks.<\/p>\n<p class=\"isSelectedEnd\">He declined to prejudge the outcome of the upcoming FOMC meeting, reiterating that policy decisions will continue to depend on incoming economic data. He did mentioned, though, that he recommended raising rates in July.<\/p>\n<p class=\"isSelectedEnd\">Musalem generally leans on the hawkish side, so his remarks are not surprising at all. He will be a voter in 2028.\u00a0<\/p>\n<\/p>\n<p>                            This article was written by Giuseppe Dellamotta at investinglive.com.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Strong growth and investment is influencing bond market Fed credibility is not in question Fed is focused on making monetary policy independent of fiscal policy Monetary policy is neutral or accomodative right&hellip;<\/p>\n","protected":false},"author":216,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[86],"tags":[],"class_list":["post-436633","post","type-post","status-publish","format-standard","hentry","category-market-news"],"_links":{"self":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts\/436633","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/users\/216"}],"replies":[{"embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/comments?post=436633"}],"version-history":[{"count":0,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts\/436633\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/media?parent=436633"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/categories?post=436633"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/tags?post=436633"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}