Fed's Musalem signals more tightening as inflation stays elevated

St. Louis Fed President Alberto Musalem is crossing the wires at an event organized by the Minneapolis Fed. So far, he commented that inflation is elevated and that to bring it back to the 2% goal, “more monetary policy firming will be required.”

Musalem added that he goes to “all meetings with an open mind” and that contacts within the St. Louis Fed's jurisdiction are worried about inflation rather than jobs. He reiterated that the economy is pretty strong, so the Fed can focus on lowering the cost of living.

Key highlights:

Inflation is elevated and being driven by persistent demand pressures and supply shocks.

Key to bring inflation back to 2% in timely manner and limit second-round effects.

To bring inflation back to target, more monetary policy firming will be required

I go into all meetings with an open mind.

Rates ought to be going up in the next 6 to 9 months

Contacts mostly worried about inflation and does not see job market worries

The economy is pretty strong right now, best thing Fed can do is lower inflation

Job market is overall balanced and stable; there is no need to cool the job market to get inflation down

There is a risk consumer vigor could wane

Nominal yields rising because real yields rising in part due to rate expectations.

Market inflation expectations remain anchored, doesn't see Fed credibility questioned