Fed’s Musalem Says Central Bank Wants To Anchor Short-Term Inflation Expectations

Federal Reserve Bank of St. Louis President Alberto Musalem said on Friday that the central bank wants to anchor short-term inflation expectations and prevent them from seeping into long-term anticipation.

Speaking at the Northwest Arkansas Fireside Chat, the Fed official noted that businesses' and consumers' inflation expectations are rising.

However, he noted that on the business side, there is an increased expectation of higher prices for inputs and outputs going forward.

“…we at the Fed don't want short-term inflation expectations to rise to such a level that they could seep into long-term inflation expectations, which would make our job harder in terms of achieving maximum employment and price stability,” Musalem stated.

“And, you know, we’re focused on not allowing that to happen. So those are the challenges that I see. And that's how they reflect back on to what our job is at the Fed,” he added.

The Fed official highlighted that many businesses are trying to manage their inventories and the timing of their supply chains as they grapple with uncertainty about the inflation rate.

“I think businesses and management teams are having to exert a little extra effort in terms of managing this uncertainty. But, you know, that's what makes good management teams.”

Musalem also expressed confidence that companies’ management teams will be able to manage through this uncertainty, but acknowledged that they are facing many unknowns.

On Friday, Boston Federal Reserve President Susan Collins indicated she is getting more skeptical about the significance of interest rate cuts in 2025.
       
Meanwhile, markets were rattled after U.S. President Donald Trump proposed a 50% tariff on the European Union.

The SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500, traded 0.69% lower, while the Invesco QQQ Trust, Series 1 (QQQ), which tracks the Nasdaq Composite, was down 0.89%.

Also See: Oil Prices Pare Early Morning Losses Driven By Trump’s Proposal Of 50% Tariffs On EU: Traders Eye US-Iran Talks

For updates and corrections, email newsroom[at]stocktwits[dot]com.