Federal Reserve Bank of St. Louis President Alberto Musalem said on Monday that the bulk of the inflationary pressures affecting US households are not the result of tariffs on foreign goods. According to his estimate, tariffs account for only about 10% of the overall rise in consumer prices.
Inflation outlook
Musalem noted that while short-term inflation expectations remain somewhat elevated, long-term expectations are firmly anchored. He anticipates inflation will stay above the Fed’s target for another two to three quarters before easing.
Policy stance
On monetary policy, Musalem described the current stance as lying between modestly restrictive and neutral. He said the Fed should remain open to the possibility of future rate cuts but stressed that policymakers must proceed cautiously given ongoing uncertainties.
Labor market risks
The St. Louis Fed chief also highlighted rising risks of labor market weakness. While the market continues to soften, he pointed out that conditions still reflect near full employment.
Tariff impact
Addressing the role of tariffs, Musalem emphasized that their effect has been more limited than initially expected, contributing to only about 10% of present inflation. He reiterated that most of the stubborn price pressures are driven by other factors.
