MNI BRIEF: Fed's Musalem: Interest Rates Likely To Be 3.5%-4% Over Long Run

MNI (WASHINGTON) - The Federal Reserve's benchmark overnight interest rate is likely to be in a 3.5%-4% range over the long run, St. Louis Fed President Alberto Musalem said Thursday. 

Both macro models and market pricing suggest "interest rates need to be a little higher now than they were before the pandemic," he told a business forum in Little Rock, Ark. Investments in AI, reshoring and green energy as well as higher projected fiscal deficits over the next 10 years support this belief, he said. 

The target fed funds rate is currently in a 5.25%-5.5% range, and FOMC officials last month projected it to fall to 2.4% to 3.8% over the long run. (See: MNI POLICY: Fed Policy Looks Tight, Bolstering Case For Cuts)