US FOMC Member Musalem Speaks

Welcome to the St. Louis Fed and to the 34th Homer Jones Memorial Lecture. Thank you for joining us this evening. The Homer Jones Memorial Lecture has featured many distinguished speakers over the years. Today is no exception. Before I introduce our speaker, I want to share about the person for whom this lecture is named. Homer Jones was a transformational leader—for the St. Louis Fed and for the Federal Reserve System. Homer Jones served as research director of the St. Louis Fed from 1958 to 1971. Under Jones and the Bank presidents ...

Fed's Musalem: Looks like Fed policy at or below long-run neutral. Fed’s Musalem: Looks Like Fed Policy At Or Below Long-Run Neutral Rate – BBG TV - In April, Thought That Easing Bias In Statement No Longer Consistent - Whether Fed Hike, Cut Or Hold Is Necessary Will Depend On What Happens With Economy Fed's Musalem: Bond markets are seeing a resilient economy and higher expected inflation. Fed's Musalem: 3/4 of the yield rise due to the higher expected neutral rate. Fed's Musalem: The possibility that we would consider an interest rate increase is greater than zero.

Good afternoon. I would like to thank Governor Jónsson for the invitation to the conference and for the opportunity to address you today. 1 I will focus my remarks on productivity growth and implications for monetary policy. This topic has generated considerable interest in the United States, where excitement about artificial intelligence (AI) has reached a fever pitch. Yet productivity growth is a broader topic than just AI. Before I get started, let me stress that these are my views and not necessarily those of my FOMC colleagues.2 Let me also note that I am an avid user of AI. I have six AI tools on the home screen of my phone. I see the tremendous impact that it can have on businesses and households. What is less clear to me is the impact that AI is having on aggregate productivity growth today and will have in the future. Productivity growth in the United States has largely recovered from the COVID doldrums, driven in large part by firms’ investments in various automation technologies, including AI. Many observers expect productivity to continue to increase sustainably at a high rate, potentially easing inflation pressures and allowing the Fed and other central banks to lower their policy rates ST LOUS FED'S MUSELEM/REYKJAVIK: FOR NOW 'A VIGILANT FOCUS ON RETURNING INFLATION TO TARGET WILL BEST ENSURE SUCCESS' #Musalem #FederalReserve #economy ST LOUS FED'S MUSELEM/REYKJAVIK: LONG-TERM INFLATON EXPECTATIONS 'DRIFTING HIGHER;' INFLATION 'RUNNING MEANINGFULLY ABOVE TARGET' #Musalem #FederalReserve #economy ST LOUS FED'S MUSELEM/REYKJAVIK: ‘BETTER POLICY WOULD BE TO LEAN AGAINST DEMAND PRESSURE ON INFLATION; MKTS APT TO DEMAND HIGHER RATES VS INFLATION #Musalem #FederalReserve #economy

MUSALEM: UNCERTAINTY ABOUT TARIFFS AND WAR IS A CHALLENGE. MUSALEM: THE LABOR MARKET APPEARS TO BE STABILIZING AFTER A SLOW COOLING PERIOD LAST YEAR. MUSALEM SAYS INFLATION IS "SIGNIFICANTLY" ABOVE THE TARGET LEVEL. MUSALEM STATED THAT THERE ARE RISKS WITH BOTH MANDATES, BUT THE FOCUS HAS BEEN MOVING MORE TOWARDS INFLATION. MUSALEM SAYS THERE ARE REASONABLE SCENARIOS THAT MAY KEEP INTEREST RATES UNCHANGED FOR A WHILE.

ST LOUIS FED'S MUSALEM Q&A/AEI: COULD SUPPORT RATE HIKE IF INFLATION WORSENS #Musalem #FederalReserve #economy ST LOUIS FED'S MUSALEM Q&A/AEI: POLICY RATE APPROPRIATE 'FOR SOME TIME' BUT COULD SUPPORT RATE CUT IF INFLATION FALLS OR JOBS MKT WORSENS #Musalem #FederalReserve #economy ST LOUIS FED'S MUSALEM Q&A/AEI:LOOKING TO SEE HOW BROAD OIL SHOCK TO BE, DURATION, AND EFFECT ON INPUT PRICES #Musalem #FederalReserve #economy ST LOUIS FED'S MUSALEM Q&A/AEI: COMMITTED TO GETTING INFLATION RATE DOWN TO2%, NOT SOME HIGHER NUMBER; HAVE TO DEMONSTRATE SUCCESS #Musalem #FederalReserve #economy

Good morning. I would like to thank the American Enterprise Institute for the invitation to speak with you today, and I look forward to an engaging discussion with Michael Strain.1 The AEI is dedicated to advancing free markets and improving lives, for example, by focusing on growth, jobs and inflation. AEI scholars have emphasized the importance of basing monetary policy decisions on economic facts and data—rather than the political needs of the moment. That is the cornerstone of central bank independence. History has shown that countries with independent central banks have better outcomes in terms of stronger economic growth and low and stable inflation. With independence comes an obligation for accountability and transparency. That is why my Federal Open Market Committee (FOMC) colleagues and I are constantly engaging with stakeholders, why we are transparent about the factors that go into our decision-making, and why I am here today to share my views. These are my personal views and not necessarily those of other FOMC participants. The economic outlook is highly uncertain. A baseline scenario for 2026 has real GDP growing close to potential, the unemployment rate holding around its current level, and core inflation beginning to gradually ease toward 2% later in the year. But other outcomes are plausible. The risks to the labor market and inflation both tilt in unfavorable directions, that is, toward a weaker labor market and greater ST LOUIS FED'S MUSALEM Q&A/AEI: ECON PICTURE 'HIGHY UNCERTAIN;' REPEATS, POLICY 'WELL POSITIONED;' WATCHNG CLOSELY #Musalem #FederalReserve #economy FED'S MUSALEM SAYS MONETARY POLICY IS AT THE LOW SIDE OF THE NEUTRAL RANGE. Fed's Musalem: Holding rates is likely appropriate for some time Fed's Musalem: Supply shocks carry greater inflation risks in the current environment

ST LOUIS FED'S MUSALEM Q&A/ST LOUIS: INFLATION REMAINS ABOVE TARGET AND JOBS MKT COOLING, SO 'A LITTLE TENSIION' BETWEEN MANDATES; SEE MORE ABOVE-POTENTIAL GROWTH AHEAD #Musalem @FederalReserve #economy ST LOUIS FED'S MUSALEM Q&A/ST LOUIS: RISKS OF MORE PERSISTENT INFLATION AND WEAKER JOBS 'ROUGHLY BALANCED;' NOW 'RIGHT AROUND NEUTRAL INTEREST RATE #Musalem @FederalReserve #economy FED'S MUSALEM: POLICY NOW NEUTRAL IN REAL TERMS AND BALANCING APPROPRIATELY; INFLATION COULD STAY HIGHER FOR LONGER, THOUGH NOT BASE CASE. ...

Just in | Fed's Musalem: New Trump Tariffs Won't Impact Economic Outlook if They Follow One-for-One Structure FED'S MUSALEM: I DON'T SEE PRODUCTIVITY GROWTH IN THE MACRO DATA YET. ... Fed's Musalem: I am focused on PCE inflation, rather than CPI. Fed's Musalem: The real Fed funds rate is at or below the neutral rate. FED'S MUSALEM: SAYS COMPANIES ARE FACING COST PRESSURES AND HOUSEHOLDS REMAIN CHALLENGED BY INFLATION; ADDS THAT A NEUTRAL REAL RATE IS APPROPRIATE, THE REAL FED FUNDS RATE IS AT OR BELOW NEUTRAL, AND POLICY IS WELL POSITIONED.