St.
Alberto Musalem is speaking and says: Tailwinds including accommodative financial conditions are currently greater than headwinds for the U.S. economy Uncertainty around tariffs and war are headwinds The labor market seems to have stabilized after gradual cooling last year Recent payroll growth has been around the breakeven rate Inflation is “meaningfully” above target Along with tariff and oil shocks there is underlying inflation the Fed needs to worry about There are risks to both mandates, but risks have been shifting toward inflation There are plausible scenarios that would require rates to remain stable for some time Current policy is either neutral or slightly accommodative in real terms There are also plausible scenarios at this point that would lead to both rate cuts and rate hikes FOMC is committed to 2% inflation Meeting the 2% target is the best thing the Fed can do for growth and employment Consumers and companies both say they are struggling with higher and rising prices The comments leaned modestly hawkish overall, with the stronger emphasis centered on persistent inflation risks and the need to keep inflation expectations anchored. Musalem repeatedly stressed that inflation remains “meaningfully” above the Fed’s 2% target and warned that tariff pressures, higher oil prices, and underlying inflation dynamics continue to pose upside risks. He also noted that risks to the Fed’s dual mandate have shifted more toward inflation, while describing current policy as neutral to slightly accommodative in real terms — language that suggests he does not view policy as overly restrictive at this stage.
At the same time, Musalem did leave the door open to multiple policy paths, acknowledging there are plausible scenarios that could justify either rate cuts or rate hikes going forward. However, the broader tone suggested patience rather than urgency to ease policy. His comments that rates may need to remain stable for some time, combined with…