Fed's Musalem calls for more rate hikes
St. Louis Federal Reserve (Fed) President Alberto Musalem said interest rates likely need to rise further to tame inflation that is both demand- and supply-driven.
St. Louis Federal Reserve President Alberto Musalem has called for additional interest rate hikes to combat inflation that is driven by both demand and supply factors. He cautioned that without further policy restraint, inflation may remain significantly above the Federal Reserve's 2% target 18 months from now. Musalem emphasized that earlier and incremental rate increases would be preferable to later and larger hikes.
He noted that inflation is still too high, at up to 3% even after accounting for supply-related factors, and that business contacts anticipate further price increases nearing 3%. The commodity shock extends beyond oil to include base metals such as copper. Musalem described the labor market as stable around full employment and not contributing to inflation pressure.
Without additional policy restraint, it is more likely that inflation will stay substantially above the 2% target 18 months from now.
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