Fed's Musalem sees inflation risks rising above employment concerns

Investing.com -- Federal Reserve Bank of St. Louis President Alberto Musalem said Wednesday that inflation risks are increasing relative to employment concerns, while emphasizing substantial uncertainty about the economy's direction.

Speaking at a Mississippi Bankers Association event in Fairhope, Alabama, Musalem noted that inflation remains well above the Fed's 2% target.

"We have risks both on the employment side and on the inflation side. In my understanding, the risks have been shifting towards more risk on the inflation side than the employment side," Musalem said.

The Fed official indicated the central bank's benchmark policy rate is currently at or near the neutral level, though it could be slightly accommodative. He suggested the economy might require maintaining rates at current levels for an extended period.

Musalem acknowledged multiple possible scenarios, including situations where officials may need to lower or raise rates.

"So a lot of uncertainty right now, and it's important to see how things settle," he said.

Last month, policymakers voted to hold interest rates steady, though three officials dissented against statement language suggesting eventual rate cuts. Those officials cited rising oil prices and uncertainty from the war in Iran as reasons to signal the next move could be either a cut or increase.

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