Fed's Musalem Backs Keeping Interest Rates Unchanged, Says Officials Missing More On Inflation Than Jobs

Federal Reserve Bank of St. Louis President Alberto Musalem on Friday reportedly backed the central bank’s decision to keep interest rates unchanged.

According to a Bloomberg report, Musalem said that the Fed is missing more on managing the inflation side of its mandate. Consumer inflation has hovered above the 2% target since March 2021, according to data from the Bureau of Labor Statistics (BLS).

“We are not missing on our employment mandate,” he said, adding that the labor market is close to full employment, according to the report.

Musalem also warned that the effect of President Donald Trump’s tariffs would start showing up in inflation over the summer. According to a Reuters report, Musalem cautioned that tariffs present risks to the Fed’s dual mandate of inflation and jobs.

“You have to take a balanced approach, which means you have to think about the likelihood of missing on each side of the mandate, the size of the potential miss, and how long that miss will be in place," said Musalem, according to the report.

Earlier on Thursday, Atlanta Fed President and CEO Raphael Bostic said that he expects the Fed to cut interest rates only once in 2025. “This question about whether tariffs are a one-time thing, or whether they’re going to be more persistent in their effects and might even cause structural changes, I think is perhaps the most important question that we have today,” Bostic said.

Data from CME Group’s FedWatch tool shows that there is an 89.4% probability of a 25-basis-point rate cut in September.

Meanwhile, U.S. equities traded higher in Friday morning’s trading session. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up 0.46%, while the Invesco QQQ Trust (QQQ) gained 0.55%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bullish’ territory.

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