Yahoo Finance Fed’s Musalem Says Data Point to Further Inflation Progress
(Bloomberg) -- Federal Reserve Bank of St. Louis President Alberto Musalem said recent data — including consumer price data out Thursday — suggest the central bank is making further progress toward its 2% inflation goal, but noted additional evidence is needed.
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Musalem described the labor market as “strong,” and said the central bank has time to evaluate more data before making a decision about adjusting policy. He said the Fed’s current policy stance is “restrictive” but not overly so.
“CPI inflation for June points to encouraging further progress towards lower inflation,” Musalem said in a moderated conversation at an event hosted by the Little Rock Regional Chamber in Arkansas. “I will be looking for more evidence that inflation can be expected to converge to 2% going forward.”
Markets are almost fully pricing in an interest-rate cut for September after further signs of disinflation were reported Thursday. The so-called core consumer price index — which excludes food and energy costs — climbed 0.1% in June, the smallest advance since August 2021.
Musalem added recent figures are “consistent with reports that consumers are becoming more price sensitive and that firms are responding with price cuts and discounts.” The latest CPI report, for example, showed prices for airline tickets and hotels declined in June.
Musalem last month said it’s more likely to take “quarters” not months to see data to support an interest-rate reduction. Musalem, the first Hispanic policymaker to lead a regional Fed bank, began his new role in April.
‘Good Data’
Chair Jerome Powell in testimony before lawmakers this week avoided signaling the timing of the first rate cut, though he said “more good data” would strengthen the central bank’s confidence that inflation was returning to its 2% target.
The Federal Open Market Committee meets next on July 30-31. The Fed has held its policy rate in a range of 5.25% to 5.5%, a more than two-decade high, for nearly a year.
San Francisco Fed President Mary Daly said on a call with reporters earlier Thursday that given recent data on employment and inflation, some adjustment to interest rates will likely be warranted — though she stopped short of offering a specific timeline for cuts.
“At this point, it is clear that the risk to our mandated goals of price stability and full employment have come into better balance and that monetary policy is working,” Daly said following the release of the June consumer price data.
Powell also emphasized policymakers face risks from both moving too quickly or too slowly to take action. While Fed officials remain committed to taming inflation, the labor market has come more into focus amid rising unemployment.
The St. Louis Fed chief noted further declines in job vacancies going forward could lead the unemployment rate to rise. While unemployment remains low at 4.1%, it has ticked up in each of the last three months.
(Adds earlier comments from Mary Daly starting in ninth paragraph and graphic.)
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