St. Louis Fed President Alberto Musalem confirmed he favored raising interest rates at last week's FOMC meeting, where officials instead held the target range steady at 3.5% to 3.75%. He also said the dollar faces no threat to its status as the top global reserve currency and described the labor market as near full employment.
Federal Reserve Bank of St. Louis President Alberto Musalem said in a Q&A session on Thursday that he favored raising interest rates at last week's Federal Open Market Committee meeting. Officials at that meeting held the target range steady at 3.5% to 3.75% instead.
Musalem said gradual rate hikes are less costly than abrupt ones. He reinforced that view days after telling the Financial Times that earlier, smaller moves are preferable to delayed, larger ones. He estimated underlying inflation is likely running between 2.5% and 3%, above the Fed's 2% target. He also said he wants monthly readings to fall below 0.2% before he is satisfied progress is being made, and flagged an El Nino weather event as a potential fresh supply shock to the inflation outlook.
Dollar's reserve status faces no threat
Musalem said he does not see conditions that would unseat the US dollar as the world's primary reserve currency, pointing to the US economy's innovation and rule of law. The dollar currently accounts for about 57% of global foreign-exchange reserves.
Labor market near full employment
On employment, Musalem said the US labor market is in strong condition and near full employment. Unemployment has been hovering between 4.2% and 4.4%, with payroll growth described as solid but modest. He said the job market is not a source of inflation, a framing that lets him press for tighter policy without pointing to labor-market weakness as a competing concern.
The comments follow prepared remarks Musalem gave earlier Thursday, in which he argued monetary policy must impose meaningful restraint on inflation rather than tolerate higher prices for the sake of productivity gains.
Sources: InvestingLive, Crypto Briefing, Crypto Briefing
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