Musalem said that the Federal Reserve’s monetary policy is in the right place at the moment, given the current labor market and inflation data.
St. Louis Federal Reserve President Alberto Musalem on Wednesday backed the central bank’s existing monetary policy stance, saying that it is in the right place at the moment, given the current labor market and inflation data.
However, he warned that recent downward revisions to employment data have further increased his perception of downside risks to the labor market.
Musalem’s remarks come ahead of the upcoming Federal Open Market Committee’s (FOMC) meeting scheduled for September 16 and 17.
“The current modestly restrictive setting of the policy rate is consistent with today’s full-employment labor market and core inflation nearly one percentage point above the Fed’s 2% target,” Musalem said. The Fed official added that he would wait for more data to form an opinion on the Fed’s monetary policy direction.
Musalem also said he expects the impact of President Donald Trump’s tariffs on inflation to fade after the next two to three quarters. “Below-trend real GDP growth and stable longer-term inflation expectations should limit the persistence of inflation,” he added.
Data from the CME FedWatch tool points to a 95.6% probability of the Fed cutting interest rates by 25 basis points in September.
Meanwhile, U.S. equities gained in Wednesday’s opening trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up 0.43%, while the Invesco QQQ Trust (QQQ) gained 0.82%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bullish’ territory.
The iShares 7-10 Year Treasury Bond ETF (IEF) was up 0.34% at the time of writing.
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