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FED: More Questions As Hawkish Musalem Wasn’t One Of Dots Objecting To Dec Cut

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  • St Louis Fed’s Musalem (’25 voter) has told the WSJ that he viewed last month’s decision to lower interest rates as a “close call” because the economic outlook appears to be different now than it was when the central bank started cutting rates four months ago.
  • By the time of last month’s meeting, the risk had increased that inflation might get stuck between 2.5-3%. Accordingly, greater caution is warranted on reducing interest rates.
  • Interestingly, he said he wasn't one of four officials last month who suggested a rate cut wasn't needed in projections submitted at the meeting. He said he penciled in two cuts for this year in those projections, putting him in line with the median.
  • Recall that Hammack was the sole dissenter that meeting which left three other 2024 dots preferring no change (presumably from non-voters unless they were voters unusually opting for a mild form of dissent).
  • Assuming there weren’t any of these soft dissents (which would rule out Bowman), that leaves Schmid as a likely contender for one of the three and also suggests that two of Bostic, Logan or Kashkari are more hawkish than we thought. 
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  • St Louis Fed’s Musalem (’25 voter) has told the WSJ that he viewed last month’s decision to lower interest rates as a “close call” because the economic outlook appears to be different now than it was when the central bank started cutting rates four months ago.
  • By the time of last month’s meeting, the risk had increased that inflation might get stuck between 2.5-3%. Accordingly, greater caution is warranted on reducing interest rates.
  • Interestingly, he said he wasn't one of four officials last month who suggested a rate cut wasn't needed in projections submitted at the meeting. He said he penciled in two cuts for this year in those projections, putting him in line with the median.
  • Recall that Hammack was the sole dissenter that meeting which left three other 2024 dots preferring no change (presumably from non-voters unless they were voters unusually opting for a mild form of dissent).
  • Assuming there weren’t any of these soft dissents (which would rule out Bowman), that leaves Schmid as a likely contender for one of the three and also suggests that two of Bostic, Logan or Kashkari are more hawkish than we thought.