Federal Reserve Bank of St. Louis President Alberto Musalem said on Thursday that his recommendation for the central bank’s September policy meeting will depend entirely on incoming economic data, signaling a data-dependent approach to the upcoming decision.
Musalem, speaking to CNBC, emphasized the need to "maintain an open mind into every meeting," while noting that acting now could prevent the need for more aggressive measures later. He described inflation as "the number one concern of the public," with underlying inflation currently running between 2.5% and 3%, above the Fed’s 2% target.
The St. Louis Fed chief characterized current monetary policy as "neutral or accommodative," with financial conditions remaining "pretty accommodative." He reiterated the Fed’s focus on restoring price stability, stating that "the best thing the Fed can do for growth is get inflation back to 2%."
Musalem, who supported a rate hike at the Fed’s July meeting, acknowledged a higher probability that inflation may stay elevated but cautioned against prejudging the September outcome. He also dismissed concerns about Fed credibility, asserting that monetary policy remains independent of fiscal considerations.
Addressing broader economic conditions, Musalem highlighted elevated input costs for businesses and uneven productivity trends, alongside signs of credit market tightening in some sectors. He also warned of potential supply-side risks from weather-related disruptions, noting that "a super El Nino might be the next supply shock."
