By Ann Saphir<\/p>\n
May 28 (Reuters) – St. Louis Federal Reserve President Alberto Musalem on Thursday said the central bank may need to increase its policy rate if inflation does not \u200cresume easing within the next six months, adding his voice to an increasingly hawkish cohort \u200cof Fed policymakers just as Kevin Warsh takes the reins as Fed chair.<\/p>\n
“If we don’t see disinflation in the next one \u200bto two quarters, that would concern me,” Musalem said at a Central Bank of Iceland and Northwestern University economic conference in Reykjavik as he laid out scenarios that in his view may require a Fed rate hike. “Right now my view is that the risks have tilted more towards the inflation side than the labor \u200cmarket side.”<\/p>\n
U.S. inflation increased at its fastest \u2060pace in three years in April, data published Thursday by the Commerce Department’s Bureau of Economic Analysis showed, with the personal consumption expenditures price index rising 3.8% \u2060from a year earlier on higher energy prices amid the war with Iran.<\/p>\n
Musalem said he could see a world where a rate cut could be needed later this year, if for instance growth slows and the labor \u200bmarket, \u200bnow stable, begins to weaken again. Unemployment was 4.3% \u200bin April and economists expect it to stay \u200cthere this month.<\/p>\n
But he made clear that he is more worried about the opposite scenario, especially if inflation expectations continue to drift higher or remain elevated, a signal that the public doesn’t believe the Fed will beat back inflation and that the worries could become self-fulfilling.<\/p>\n
“I see risks that inflation may not converge to target as we would like,” he said. “So we need to be very vigilant.”<\/p>\n
Musalem’s hawkish remarks \u200cfollowed a speech in which he warned of the risks \u200bof banking on AI’s potential for boosting productivity, and therefore \u200bpushing down on inflation, before there is \u200bclear evidence it is doing so.<\/p>\n
Warsh, who was sworn in as Fed chair less \u200cthan a week ago, has said he \u200bbelieves AI will be a \u200bstrong disinflationary force, a view that suggests he could support the easier monetary policy that President Donald Trump says the economy needs and that he expects Warsh to deliver.<\/p>\n
The Fed has \u200bkept its policy rate in the \u200c3.50%-3.75% range all year and financial markets are pricing in a better-than-even chance of a \u200brate hike by the end of 2026. Central bankers next meet to set policy \u200bin mid-June.<\/p>\n
(Reporting by Ann Saphir; Editing by Chizu Nomiyama )<\/p>\n","protected":false},"excerpt":{"rendered":"By Ann Saphir May 28 (Reuters) – St. Louis Federal Reserve President Alberto Musalem on Thursday said the…\n","protected":false},"author":2,"featured_media":471733,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[203691,72,203692,113,600,61,16144,60,66147,203693,1187,21154],"class_list":["post-471732","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-alberto-musalem","tag-business","tag-central-bank-of-iceland","tag-economy","tag-fed","tag-ie","tag-inflation-expectations","tag-ireland","tag-kevin-warsh","tag-musalem","tag-northwestern-university","tag-policy-rate"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/471732","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=471732"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/471732\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/471733"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=471732"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=471732"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=471732"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}