Fed Schmid and Musalem comments on US interest rates and economy 💵

Kansas City Fed president, Jeffrey Schmid and St. Louis Fed president Alberto Musalem commented in US monetary policy and its future perspectives. Overall, both Fed members speeches were quite cautious, Fed's confidence in further inflation fall probably didn't change, however recent CPI reading do not point to 'aggressive rate cuts cycle' stance, with still higher both headline and core.

Fed Schmid

• The baseline of interest-rate cost appears to be higher than people thought a year or two ago.
• It remains to be seen how much more the Fed will cut rates, and where they may settle.
• Fed rate cuts to date are an acknowledgement of growing confidence inflation is on the path to 2% goal.
• I hope productivity growth can outrun the effects of slowing population growth, and rising fiscal deficits.
• I won't let enthusiasm over rising productivity get ahead of data or commitment to reaching the Fed's goals.
• I expect the economy to grow closer to 2% rate going forward.

Fed Musalem

• It is hard to derive much signal from the most recent jobs report; low number clouded by storm and other impacts.
• Monetary policy is restrictive, but financial conditions overall are supportive of economic activity.
• I am attuned to the risks of rising layoffs, though disorderly deterioration of the labor market is unlikely given the health of businesses.
• Core consumer price index and core personal consumption expenditures price index remain elevated.
• The pressure in services industries is slowly abating.
• Monetary policy is well positioned, the Fed can judiciously and patiently judge incoming data to decide on further rate cuts.
• Further rates easing may be appropriate if inflation continues to fall.
• Monetary policy is to remain appropriately restrictive while inflation remains above 2%.
• The labor market remains in the range of full employment.
• Strong economy on track for a solid fourth quarter.
• Growth is broad-based and driven by consumption, income growth, productivity, supportive financial conditions, and wealth effects.
• Recent high productivity could prove durably structural, but that remains uncertain.
• The business sector is generally healthy, though the smallest businesses and those in the consumer discretionary market is seeing slower earnings growth.
• Recent information suggests that the risk of inflation moving higher has risen, while risks to the job market remain unchanged or have fallen.
• The US central bank may be on the last mile to price stability, inflation is expected to converge to the 2% target over the medium term.

Source: xStation5