Two Federal Reserve presidents said on Friday that interest rates will need to move higher to rein in inflation. The St. Louis Fed's Alberto Musalem wants another hike soon, and the Dallas Fed's Lorie Logan sees at least two more quarter-point increases. Fed funds futures traders price a roughly 76% likelihood of a December hike.
Two Federal Reserve presidents said on Friday that rates will need to move higher to rein in inflation. The St. Louis Fed's Alberto Musalem said another rate hike will need to happen soon, while Lorie Logan of the Dallas Fed predicted the central bank will need to raise rates by quarter-point increments at least two more times.
Their comments come after the Fed left rates unchanged on Wednesday. Fed funds futures traders are now pricing in a roughly 76% likelihood of a quarter-point increase in December, according to CME's FedWatch tool.
Musalem warns that inflation is running high
Musalem described the U.S. economy as resilient and pointed to Thursday's GDP data, which showed growth of 3.4%. He also said the labor market has been stable and balanced, with unemployment at 4.2%.
But he warned that inflation is too high, citing the personal consumption expenditures price index, which showed annual inflation above 3%. In prepared remarks for the Shadow Open Market Committee, Musalem said: "additional firming of monetary policy will be necessary, and soon".
He added that a likely scenario exists in which inflation stays above 2% unless the Fed adjusts monetary policy.
Logan: skipping a meeting is possible
Logan said the FOMC needs to implement at least two more 25-basis-point increases. Still, she said that does not mean a hike at every meeting, and that after the two hikes it would make sense to pause and examine economic and financial developments.
She will be among the Fed officials voting on the December decision. Musalem is slated to be a non-voting member of the committee until 2028.
Dissents and outside voices
Two of the 12 FOMC voters, Governor Lisa Cook and Cleveland Fed President Beth Hammack, dissented from Wednesday's decision and wanted a quarter-point hike. A December increase would be the second of 2026, after the committee chose a quarter-point hike in September.
Former Richmond Fed President Jeffrey Lacker told CNBC he would have favored a hike this week.
Source: CNBC
Trading involves risk.
Risk Disclaimer
