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St Louis Fed's Musalem Shifts In Dovish Direction, Open To Sept Cut

FED
St Louis Fed Pres Musalem is one of the most hawkish members of the FOMC, but his comments today suggest he is falling in line with the Fed leadership's view that risks to the inflation vs employment mandates have come into balance.
  • Importantly, the 2025 voter notes that the tight labor market no longer appears to pose upside inflation risks, and that while policy is merely "moderately" restrictive, "inflation seems to have returned to a path consistent with 2% over time".
  • By saying that "the time may be nearing when an adjustment to moderately restrictive policy may be appropriate", there doesn't appear to be much remaining opposition on the Committee to a September rate cut. As recently as mid-June he said it would more likely take "quarters" than "months" before he would be "confident" about cutting rates.
  • To be sure, he sounds more open to a September cut than fellow hawk Gov Bowman, who noted over the weekend that her approach to cuts would remain "cautious". Though of course one difference is that Musalem had July's relatively tame inflation readings in hand when he made his comments.
  • Needless to say though it would probably take a huge data surprise or two in the next month to bring Musalem on board with the idea of a 50bp cut - at this juncture it doesn't appear there is much support for such a move on the Committee in general.
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