Alberto Musalem, president and CEO of the Federal Reserve Bank of St. Louis, spoke with the New York Economic Club in New York City, USA on February 20, 2025.
Brendan McDermid | Reuters
St. Louis Federal Reserve President Alberto Mu Salem has repeatedly supported his interest rate cuts last week, but said he is wary of moving further.
Less than a week after the Federal Open Market Committee cut its key overnight borrowing rate by a quarter point, central bank officials advocated a warning as they continue to worry about inflation.
Musalem characterized the cuts as “a preventative move aimed at supporting the labour market with full employment and opposing further weakening.”
“Now the monetary policy stance is between modest restrictions and neutrality, and I think that’s appropriate,” he added in a prepared statement in preparation for a speech to the Brookings Agency in Washington, D.C.
Full FOMC showed that one staff member this year, including last week, did not want this year’s cuts, in a meticulous “dot plot” grid of future rate forecasts. However, a small majority require at least two cuts, implying one each at the remaining two meetings this year.
Musalem is a voting member of FOMC this year.
Musalem considers financial conditions to be “supportive” and remains concerned about the impact of tariff inflation, taking into account the current federal funding rate, and is now considered “nearly neutral” between 4% and 4.25%.
He says he sees a risk of leaning towards the labour market rather than inflation, but he warns him not to go too far.
“Stopping weight on one target at the expense of another target can lead to undesirable outcomes,” Musalem said.
Other Fed officials are also reluctant to cut back. Rafael Boschtic, federal president of Atlanta, who didn’t vote for the FOMC until 2027, told the Wall Street Journal he didn’t support additional cuts this year.
