Source: Jin10 Data
The new regional Fed chairman said he would support raising interest rates if the data proves necessary.
St. Louis Fed President Alberto Musalem said that a rate cut in the United States could be delayed and that it is more likely to take 'several quarters' rather than months to see data supporting a rate cut.
Musalem said on Tuesday that the Fed still needs to consider and explain to the public the possibility of other economic scenarios. He said further tightening may be necessary if inflation progress stalls or reverses.
In a speech he prepared for an event in St. Louis, he said, 'I need to observe a period of favorable inflation, slowing demand, and expanding supply before I can be sure that lowering the federal funds rate target range is appropriate. These situations may take several months, and it is more likely to take several quarters to show up.'
Fed officials last week lowered their expectations of three rate cuts forecast in March to one. They warned that they need more confidence in the progress of inflation towards their 2% target before they begin cutting, especially after the slowdown earlier this year.
Although Musalem did not specifically outline his rate forecast, his comments suggested that he, like other officials, expects one or no cuts this year.
Nonetheless, he listed 'potential early signs of continued progress on inflation,' including 'the welcome downtick in the May inflation rate,' and added that 'it takes more than one data point to confirm a trend.'
The new regional Fed chairman also said recent reports suggest some softness in the US economy. He said actual consumer spending and nominal retail sales data 'have mostly fallen short,' and May data 'has been mixed.'
The Fed will begin reviewing its monetary policy framework later this year, and Musalem stressed that officials need to consider alternative economic scenarios, not just the most likely outcome.
He said, 'If the evidence for other inflation scenarios starts to emerge, I would support further strengthening our monetary policy.'
Musalem, the first Hispanic decision-maker to lead a regional Fed, began his new job in April. His career includes senior positions at Tudor Investment Corp. and the New York Fed.
Editor / jayden