St. Louis Federal Reserve Bank President Alberto Musalem urged further policy tightening soon, saying inflation risks still favored prices staying above the Fed’s goal as U.S. inflation remained elevated.
In prepared remarks delivered Oct. 30 at a Shadow Open Market Committee meeting in New York, Musalem said his call was his own assessment and might not reflect the views of his Federal Open Market Committee (FOMC) colleagues. He described further firming as “necessary, and soon.”
Musalem did not name a meeting for any further move or specify its size. The FOMC voted 10-2 on Oct. 28 to keep the federal funds target range at 3.75% to 4%. Fed Governor Lisa D. Cook and Cleveland Fed President Beth M. Hammack dissented, favoring a 0.25-percentage-point increase.
Musalem said persistent demand had kept economic activity growing at or above potential despite negative supply shocks. He cited strong consumer spending and data-center investment as examples. Energy costs had added to goods inflation, while services inflation remained above 3%, he said.
The U.S. Bureau of Economic Analysis (BEA) reported Oct. 29 that the personal consumption expenditures price index rose 3.6% from a year earlier in September. The measure excluding food and energy increased 3.1%; monthly gains were 0.5% and 0.3%, respectively.
Separately, Musalem said inflation was distortionary and had regressive effects. He said growth in nominal pay had lagged price increases, eroding workers’ purchasing power. He argued that lowering inflation promptly was the best way monetary policy could serve employment and growth goals.
Musalem described policy as accommodative despite tighter financial conditions around the Fed’s September action, which he characterized as milder than moves during earlier periods of financial stress. He also pointed to 1970s Shadow Open Market Committee members who argued that price stability supported maximum employment and sustained growth, saying history had backed their view.
The remarks continue an issue EconoTimes covered in an earlier report on Musalem’s call for tighter policy. The next BEA personal income and outlays report, covering October, is scheduled for Nov. 25 at 8:30 a.m. EST. The FOMC’s next meeting is set for Dec. 8-9.
