St. Louis Federal Reserve Bank President Alberto Musalem | Photocredit: Ann Saphir/Reuters
St. Louis Fed President Alberto Musalem said on Friday that he needs more data before he decides to support a rate reduction during the meeting of 16-17 September of the FED, since inflation is above the purpose of 2% of the FED and is expected to be higher, while the risks on the labor market still have to be realized.
“It is really that inflation comes closer to 3% than to 2%. That is real, and there is a possibility, not the basic case that there can be some perseverance,” Musalem told Reuters. “So that is a risk against the non -realized risk, not yet real, of a potential decline in the labor market.”
“The policy is now in the right place for a complete labor market and the inflation that runs above the goal. It’s in the right place … to lean against inflation,” said Musalem. “But that is on a complete labor market for work. If you happen to be a risk for the labor market, that initial policy institution must be adjusted.”
Inflation above the goal, remain risks for the labor market
“I will update my prospects and risk balance and up to two days, three days before the meeting,” he said. “Then I will decide.” Musalem spoke here on the sidelines of the annual research conference of the FED, where FED chairman Jerome Powell pointed to a possible cut in morning remarks of September, given a “basic case” that tariff-controlled inflation would probably fade, while the risks on the labor market seemed to rise.
“The baseline -front views and the shifting risk balance can justify that our policy position will be adjusted,” said Powell, words that investors have interpreted to mean that the tariff reductions are being thereby.
“However, the verb is ‘May’, I think,” said Musalem, a voter about interest this year.
Policy is currently leaning against inflation, adjustments possible
His no more committal approach showed the constant restraint in some policy makers to lower interest rates, while inflation was above both the target of the FED and the risk of moving higher.
Musalem said he agreed that his basic case now was that rates have a brief impact on inflation, while slowing down economic growth was a greater risk on a slide on the labor market.
But he said he hoped to get a better understanding of where the economy is going to develop an opinion “all over the path … For me it is not just about September.”
During the September meeting, FED policy makers will provide updated projections from where they are thinking of inflation, the unemployment rate and the interest rates will go to. Before they will receive what a crucial job report could be, that the month of August covers, that could confirm that the weakness that some policy makers are worried is developing, or intact the current assessment of an economy that works on work.
“Uncertainty is lifting to a certain extent,” said Musalem. “We now have the sketch of tax policy. We have the sketch of trade policy. Now we know the immigration policy. The more data we get, the better … I will judge, are rates that take place or not, and whether the risks of the labor market are real.”
Published on August 23, 2025
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