Summary
- St. Louis Fed President Alberto Musalem said the benchmark interest rate should remain on hold, indicating it may stay at the current 3.50%% to 3.75%% range.
- He said rising oil prices could spill over into core inflation and broader services prices, and that the Fed remains open to a rate hike if inflation expectations rise.
- Markets see the Fed’s strengthening hold stance and trends in energy prices and inflation as key factors shaping the future policy path.
Forecast Trend Report by Period
A Federal Reserve official underscored the case for keeping interest rates unchanged for now, citing upside inflation risks from higher oil prices. He also left open the possibility of further rate increases, depending on how conditions evolve.
Reuters reported on June 15 that St. Louis Fed President Alberto Musalem said rising oil prices could feed into core inflation, meaning the benchmark interest rate may need to remain at its current 3.50% to 3.75% range for the time being.
He said core inflation could stay about 1 percentage point above the Fed’s 2% target through the rest of this year. By year-end, overall inflation is expected to be close to 3%.
Musalem also said higher oil prices could spread more broadly through services prices. If inflation expectations rise, the Fed would remain open to raising rates.
He described the recent move in the oil market as the third supply shock in 12 months. Policy factors such as higher tariffs and tighter immigration restrictions could also weigh on prices, employment and growth.
Even so, he expects economic growth this year to slow while remaining in a 1.5% to 2% range.
Markets view energy prices and inflation trends as key variables for the Fed’s policy path as support grows within the central bank for keeping rates on hold.
JH Kim
reporter1@bloomingbit.ioHi, I'm a Bloomingbit reporter, bringing you the latest cryptocurrency news.
