Fed’s Musalem Says Further Rate Hikes Needed ‘Soon’ as Policy Remains Accommodative

• Musalem says more Fed tightening is needed “soon”
• He calls policy and financial conditions accommodative with inflation still elevated
• He prefers gradual hikes over abrupt moves

St. Louis Fed President Alberto Musalem said Friday that additional firming of monetary policy will be necessary, and soon. He spoke in prepared remarks for the Shadow Open Market Committee. He described current monetary policy and overall financial conditions as accommodative, and said inflation remains elevated and is unlikely to ease without Fed action.

Musalem said moving sooner with rate increases lowers the risk of damage to the broader economy, and he favors incremental changes over abrupt ones. This echoes earlier comments from Richmond Fed President Thomas Barkin. He added that higher long-term bond yields reflect expectations of higher policy rates, and that financial conditions have tightened but not by much. He said the best thing the Fed can do now is restore price stability.

The remarks give an early signal of the Fed’s hiking bias following its recent decision to hold rates steady.