Today, Federal Reserve members Alberto Musalem and Beth Hammack spoke about U.S. monetary policy and the risks associated with tariffs. Below are their key comments.
Comments from Fed's Musalem:
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If trade tensions are durably de-escalated, inflation could return to target, the labor market could remain resilient, and current monetary policy would continue to be appropriate.
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Tariffs may have both temporary and lasting effects on inflation.
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Even after the May 12th de-escalation, tariffs are still likely to weaken the labor market and push prices higher.
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Economic policy uncertainty remains unusually high.
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The U.S. economy has strong underlying fundamentals, the labor market is stable, and inflation has eased, although it remains above the 2% target.
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If inflation expectations become unanchored, Fed policy should prioritize price stability.
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A balanced response to rising inflation and unemployment is possible if inflation expectations remain well-anchored.
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Current monetary policy is well-positioned for existing conditions.
Comments from Fed's Hammack:
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Tremendous uncertainty continues to weigh on economic activity.
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Future policy decisions may offset the effects of current trade policy.
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I see a stagflation scenario as a likely possibility.
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I don’t want to overreact to developments in international trade.
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Uncertainty surrounding the White House tax bill is complicating our forecasts.
EURUSD (H1 interval)
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Source: xStation5
