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Fed's Musalem: Recent information suggests that the risk of inflation moving higher has risen

Federal Reserve (Fed) Bank of St. Louis President Alberto Musalem hit the wires on Wednesday, noting that sticky inflation figures make it difficult for the Fed to continue to ease rates. The Fed's Musalem spun focus onto the overall healthy appearance of the US labor market to ease negative pressure from admitting that inflation continues to flaunt downward pressure from the Fed.

Key highlights

The US central bank may be on the last mile to price stability, inflation is expected to converge to the 2% target over the medium term.

Recent information suggests that the risk of inflation moving higher has risen, while risks to the job market remain unchanged or have fallen.

The business sector is generally healthy, though the smallest businesses and those in the consumer discretionary market is seeing slower earnings growth.

Recent high productivity could prove durably structural, but that remains uncertain.

Growth is broad-based and driven by consumption, income growth, productivity, supportive financial conditions, and wealth effects.

Strong economy on track for a solid fourth quarter.

Monetary policy is to remain appropriately restrictive while inflation remains above 2%.

Further rates easing may be appropriate if inflation continues to fall.

Monetary policy is well positioned, the Fed can judiciously and patiently judge incoming data to decide on further rate cuts.

The pressure in services industries is slowly abating.

Core consumer price index and core personal consumption expenditures price index remain elevated.

I am attuned to the risks of rising layoffs, though disorderly deterioration of labor market is unlikely given health of businesses.

I expect economy to grow closer to 2% rate going forward.

Monetary policy is restrictive, but financial conditions overall are supportive of economic activity.

 It is hard to derive much signal from most recent jobs report; low number clouded by storm and other impacts.

I do not think the dollar's status is challenged by crypto currencies.

Author

Joshua Gibson

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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