• Investing
  • Stock
  • Editor’s Pick
  • Economy
The Significant Deals
Editor's Pick

Fed’s Musalem expects more rate cuts, keeping options open on December meeting

by December 4, 2024
written by December 4, 2024

By Michael S. Derby

NEW YORK (Reuters) – St. Louis Federal Reserve President Alberto Musalem said on Wednesday he expects the U.S. central bank will be able to continue to cut interest rates but isn’t ready to say what he thinks should happen at its policy meeting later this month.

With inflation likely to continue to ebb to the Fed’s 2% target over time, “additional easing of moderately restrictive policy toward neutral will be appropriate over time,” Musalem said at a Bloomberg monetary policy conference. 

“Along this baseline path, it seems important to maintain policy optionality, and the time may be approaching to consider slowing the pace of interest rate reductions, or pausing, to carefully assess the current economic environment, incoming information and evolving outlook,” he said. 

Financial markets expect the Fed to cut its policy rate by a quarter of a percentage point from the current 4.50%-4.75% range at its Dec. 17-18 meeting, as it seeks to adjust the stance of policy to easing inflation and a better-balanced labor market. 

Musalem said he needs to see more data before firming his view of what’s needed at the meeting, saying “I’m keeping all my options open.”

The longer-run outlook for policy, however, has grown less clear after President-elect Donald Trump’s victory in last month’s U.S. election. Trump ran on a platform of import tariffs, deportations of undocumented immigrants, and tax cuts, which could reignite inflation pressures and unsettle the economic landscape.

Musalem noted that the “textbook” understanding of tariffs points to higher prices and lower demand, but he noted he’ll consider changes in government policies as they happen. He said none of that uncertainty argues against the central bank continuing to make forecasts.

He also said monetary policy is “well positioned” to deal with the economic outlook and the current restrictive stance is appropriate given that core price pressures remain above the Fed’s 2% inflation target. Musalem noted that “in the current environment, easing policy too much too soon poses a greater risk than easing too little, or too slowly.” 

He said it could take another two years to get inflation to the central bank’s target and added that a patient monetary policy stance is appropriate given the current level of inflation in a “strong” economy and job market that is at levels consistent with full employment. 

Musalem said he expects growth to moderate toward the economy’s long-term potential amid further labor market cooling and moderating compensation growth. “I expect the labor market will remain consistent with full employment while the unemployment rate rises modestly toward estimates of its natural rate,” he added.

He also addressed the Fed’s ongoing effort to shrink the size of its balance sheet through a process known as quantitative tightening, which has so far taken the central bank’s holdings from a peak of about $9 trillion in the summer of 2022 to its current level of about $7 trillion.

“I expect the balance sheet will continue to roll off,” but when it comes to the point where liquidity becomes too tight, “we’re tying to find that point of transition. We don’t know where that point is.”

This post appeared first on investing.com
0 comment
0
FacebookTwitterPinterestEmail

previous post
Russia’s Putin questions the need for dollar forex reserves, touts bitcoin
next post
Macron aims to install new French PM quickly if government falls, sources say

You may also like

China central bank conducts 1.7 trln yuan of...

January 27, 2025

Fuji Media, rocked by sexual misconduct allegations, says...

January 27, 2025

ECB president fears loss of central bank independence

January 27, 2025

European tech shares tumble as China’s AI push...

January 27, 2025

Futures slip as investors eye China’s latest AI...

January 27, 2025

Markets may be repeating the mistake of 2019,...

January 27, 2025

How billionaire Caltagirone could influence Italy’s banking M&A...

January 27, 2025

How Italy’s MPS went from near collapse to...

January 27, 2025

Analysis-To weather Trump, emerging market investors look to...

January 27, 2025

Chinese AI startup DeepSeek overtakes ChatGPT on Apple...

January 27, 2025
Become a VIP member by signing up for our newsletter. Enjoy exclusive content, early access to sales, and special offers just for you! As a VIP, you'll receive personalized updates, loyalty rewards, and invitations to private events. Elevate your experience and join our exclusive community today!








    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • China outlines more controls on exports of rare earths and technology

      October 10, 2025
    • Paramount acquires Bari Weiss’ The Free Press, naming her the top editor of CBS News

      October 7, 2025
    • YouTube to pay $24 million to settle Trump lawsuit

      October 1, 2025
    • Charlie Javice sentenced to 7 years in prison for fraudulent $175M sale of aid startup

      October 1, 2025

    Categories

    • Economy (245)
    • Editor's Pick (3,646)
    • Investing (651)
    • Stock (6,426)

    Latest News

    • China outlines more controls on exports of rare earths and technology
    • Paramount acquires Bari Weiss’ The Free Press, naming her the top editor of CBS News

    Popular News

    • Robinhood CEO sees Amazon-like subscription model as path to ‘loyalty’ in financial services
    • Earnings call: Mercer International posts mixed Q3 results amid market shifts

    About The Significant deals

    • About us
    • Contacts
    • Privacy Policy
    • Terms & Conditions

    Copyright © 2025 thesignificantdeals.com | All Rights Reserved

    The Significant Deals
    • Investing
    • Stock
    • Editor’s Pick
    • Economy