St. Louis Fed President Alberto Musalem said he would have supported raising the federal funds rate at the July FOMC meeting if he had a vote this year. In a CNBC interview, he said monetary policy is neutral or accommodative, with the real policy rate below the committee's neutral long-run estimate and financial conditions pretty accommodative. He attributed high inflation to supply shocks and persistent demand partly driven by the AI buildout, and warned a super El Niño could add another shock in the fall. Underlying inflation, stripping out supply shocks, is still running between 2.5% and 3.0%, which he called too high, and he said earlier, more gradual rate increases are preferable to later, potentially larger, more abrupt increases. Musalem will next vote on the FOMC in 2028.
Musalem favors a rate hike, signaling tighter policy ahead, which would raise the effective federal funds rate.
Hawkish comments suggest higher rates, pushing 10-year yields up.
