Alberto Musalem, president and CEO of the Federal Reserve Bank of St. Louis, spoke on February 20, 2025 at the New York Economic Club in New York City, USA.
Brendan McDermid | Reuters
WASHINGTON – St. Louis Fed Chairman Alberto Musalem said on Monday the risk of high inflation is rising.
In a keynote speech at the National Association for Business Economics Conference, Mousham noted that his benchmark case was the gradual progress of inflation towards 2% of the central bank. He noted that this situation requires inflation expectations to remain anchored and stable.
But, “Inflation expectations have risen sharply in the past few weeks, and that’s something I’m paying close attention to.”
Indeed, as inflation expectations grow, February readings on the Conference Committee’s Consumer Confidence Index reflect the biggest month decline since August 2021. The Supply Management Institute’s manufacturing PMI also showed prices rose sharply in the month.
“Businesses and households are obviously more sensitive to expectations of higher inflation,” Musalem said. “That’s why risks seem to be more upside-down, but the benchmark is for sustained disbandment.”
Investors enter 2025 and the Fed is expected to lower interest rates this year. However, the central bank kept interest rates within the current range of 4.25%-4.5% after its January meeting, noting that inflation is still “raised”.
CME Group’s FedWatch tool also shows a 93% chance of traders’ price, i.e. the Fed keeps interest rates at current levels.
Musalem’s remarks are as investors impose tariffs on U.S. imports from China, Mexico and Canada, and many fear that the tax will drive prices up, making it difficult for the Fed to lower rates.
