Fed May Need Further Rate Hikes Amid Strong Demand, Commodity Price Shocks

St. Louis Fed President Alberto Musalem believes the US Federal Reserve may need further rate hikes to combat strong demand and commodity price shocks that are keeping inflation elevated.

Musalem, who is not currently a voting member of the Federal Reserve's rate-setting Federal Open Market Committee (FOMC), emphasized the importance of maintaining sufficiently restrictive monetary policy to bring inflation back to target.

The St. Louis Fed President noted that both persistent demand and recurring supply forces are contributing to elevated inflation risks, making it more likely for inflation to remain above the 2% target in 18 months without further policy restraint.