Federal Reserve Bank of St. Louis president Alberto Musalem has urged caution regarding further interest rate reductions, noting that inflation remains above the central bank’s 2 per cent target. Musalem acknowledged his support for the Fed’s recent rate cuts, implemented to bolster the labour market, but he reiterated his stance that policymakers must maintain restrictive rates to curb elevated inflation. The Federal Reserve Bank of St. Louis participates in setting national monetary policy, and it supervises banks and provides financial services. It is one of 12 regional reserve banks that, together with the Board of Governors in Washington, D.C., constitute the Federal Reserve System.
Speaking at an event in Evansville, Indiana, Musalem stated, “We need to proceed and tread with caution, because I think there’s limited room for further easing without monetary policy becoming overly accommodative.” He characterised the current policy as being between modestly restrictive and neutral, emphasising the need to “continue to lean against above target-inflation while providing some support to the labour market.”
According to pricing in futures contracts, investors now view the likelihood of a rate cut at the Fed’s December 9-10 meeting as a coin toss. Musalem had previously indicated earlier in the week his expectation for a robust economic rebound in the first quarter.
