MNI: Fed's Musalem Sees Risks To Inflation, Growth Balanced

Federal Reserve Bank of St. Louis President Alberto Musalem said Wednesday he sees the risks of higher inflation and weaker growth as balanced at this time but expects the Fed to achieve price stability later than he had anticipated in December. 

"The time horizon over which I’m expecting inflation to converge to 2% – I pushed it further into 2027 in this round," he told reporters, referring to last week's FOMC update on individual policymakers' economic forecasts. He declined to reveal his policy path projections. 

A "balanced approach" to setting monetary policy is warranted if both the labor market cools and inflation accelerates – as long as inflation expectations remain anchored, Musalem said. That approach involves looking at how far each side of the mandate is from the Fed's goals and how long it would take to return them to goal. 

"If inflation expectations became or were threatening to become unanchored, then I’d have to think a little harder about the price stability side of the mandate," he said. "It's very difficult to achieve maximum employment without price stability. By stabilizing inflation expectations, you can actually help with the employment side of the mandate." (See: MNI INTERVIEW: Fed Backing Away From 2025 Cuts, Says Lacker)