Overview
- St. Louis Fed President Alberto Musalem, speaking Wednesday at the Mississippi Bankers Association, said inflation now poses the bigger policy risk and rates could stay unchanged for some time.
- He said inflation is running meaningfully above the 2% goal, citing March readings of 3.5% for the Fed’s preferred PCE index and 3.2% for core PCE, which strips out food and energy.
- Musalem warned that pressures have spread beyond tariffs and oil to higher costs for items like aluminum, helium and diesel, which executives say are disrupting plans and hiring.
- He described the job market as stable after last year’s cooling and said the policy rate, held at 3.5% to 3.75% since December, may need to stay put until inflation clearly moves lower.
- Reuters reported that investors now see rate cuts much later, with many not expecting them until the second half of 2027, as officials watch April inflation and jobs reports for direction.