Fed’s Musalem keeps options open for September meeting

Investing.com -- Federal Reserve Bank of St. Louis President Alberto Musalem said Thursday he remains undecided about what action to recommend at the central bank's September policy meeting, telling CNBC that his decision "depends" on incoming data.

Musalem, who supported a rate increase at the Fed's July meeting, said he wants to "maintain an open mind into every meeting." He added that while he still sees a higher probability that inflation will remain above the Fed's target, he will not prejudge the upcoming September Federal Open Market Committee meeting.

The St. Louis Fed president stated that underlying inflation is between 2.5% and 3%, which he described as too high and must be lowered. He noted that given current Fed rates, he sees a lower probability of getting inflation to 2%.

Musalem said that hiking rates now could save more aggressive action later. He identified inflation as the number one concern of the public and noted that businesses are facing high input costs.

The Fed official stated that monetary policy is neutral or accommodative right now and that financial conditions are pretty accommodative. He said strong growth and investment are influencing the bond market.

Musalem added that the best thing the Fed can do for growth is get inflation back to 2%. He noted that productivity is seeing a recovery but warned that some parts of the economy are seeing credit getting crowded out.

The St. Louis Fed president said the Fed is focused on making monetary policy independent of fiscal policy and stated that Fed credibility is not in question. He also mentioned that a super El Nino might be the next supply shock.

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