Musalem Stresses Gradual Rate Hikes Amid Inflation Risks

Alberto Musalem, President of the Federal Reserve Bank of St. Louis, recently weighed in on monetary policy, expressing his hawkish views on inflation and interest rates.

Musalem confirmed that he supported raising interest rates at last week's Federal Open Market Committee meeting, where officials kept the target range steady at 3.5% to 3.75%. He sees a higher probability of inflation remaining above target and estimated underlying inflation is running between 2.5% and 3%, well above the central bank's 2% goal.

Musalem prefers gradual rate increases over abrupt changes, suggesting an incremental approach to tightening policy. He also flagged El Nino as a potential fresh supply shock, broadening the inflation debate beyond tariffs and Middle East energy disruptions.