MNI BRIEF: Musalem - Limited Room For Further Fed Easing

Federal Reserve Bank of St. Louis President Alberto Musalem cautioned Thursday there's limited room to ease monetary policy after already lowering the central bank's benchmark overnight rate 150 bps since 2024. 

"We need to proceed and tread with caution, because I think there's limited room for further easing without monetary policy becoming overly accommodative," he told the Evansville Regional Economic Partnership in Indiana. "Remember, inflation is still at 3% and I believe policy right now is somewhere between modesty restrictive and neutral and is probably getting closer to neutral than to modestly restrictive."

The real interest rate is running at around 1% now, close to the median committee projection for the longer term neutral rate. "I believe we need to continue to lean against above-target inflation, while providing some support to the labor market."

The FOMC is split over whether to cut rates for a third straight meeting in December. (See: MNI INTERVIEW: Fed Will Cut In Dec, More Next Year-Reinhart)