Fed’s Musalem: Inflation is meaningfully above target

Alberto Musalem, President of the Federal Reserve (Fed) Bank of St. Louis, spoke at the Mississippi Bankers Association on Wednesday. He said that uncertainty around tariffs and war is a headwind. He also said that along with tariff and Oil shocks, there is underlying inflation the Fed needs to worry about.

Key takeaways:

Tailwinds including accommodative financial conditions currently greater than headwinds for US economy.

Uncertainty around tariffs and war are headwinds.

The labor market seems to have stabilized after gradual cooling last year.

Recent payroll growth has been around the breakeven rate.

Inflation is "meaningfully" above target.

Along with tariff and oil shocks, there is underlying inflation the Fed needs to worry about.

There are risks to both mandates, but risks have been shifting towards inflation.

There are plausible scenarios that would require rates to remain stable for some time.

Current policy is either neutral or slightly accommodative in real terms.

There are also plausible scenarios at this point that would lead to both rate cuts and rate hikes.

FOMC is committed to 2% inflation.

Meeting the 2% target is the best thing the Fed can do for growth and employment.

Consumers and companies both say they are struggling with higher and rising prices.

Monetary policy independence is a valuable asset for any country.

Fed must be held accountable for outcomes and communicate transparently about its decisions.

Hear from all sectors that higher aluminum, helium and other input prices will be disruptive.

Firms are saying that they are not hiring due to uncertainty.”