St. Louis Fed President Alberto Musalem said on Monday that he supported last week’s rate cut, framing it as a precautionary step to shield the labor market. However, he warned that with inflation still running above the central bank’s 2% target, the Fed has limited scope for additional easing.
Key quotes
- Musalem backed a 25-basis-point cut as a protective measure for the labor market but emphasized limited room for further policy easing.
- Monetary policy, he noted, must continue countering inflation that remains above the Fed’s target.
- Over-prioritizing the labor market could risk excessively loose policy, ultimately doing more harm than good.
- Tariffs are contributing to upward price pressures, and their full effect has not yet been reflected in inflation data.
- The U.S. economy is close to full employment, and the recent cut should help sustain that strength.
- With financial conditions already loose, Musalem cautioned the Fed should proceed carefully on additional cuts.
- He added that he would support further easing if signs of labor market weakness increase, as long as inflation risks and expectations do not intensify.
