ST. LOUIS– With the markets already counting on the Federal Reserve to continue to reduce rates this year after lowering rates last week for the first time in 2025, several Fed presidents have since offered widely varied views on what could lie ahead.
Musalem said he continues to worry about inflation, and characterized last week’s cut as “a precautionary move intended to support the labor market at full employment and against further weakening.”
“The stance of monetary policy now lies between modestly restrictive and neutral, which I view as appropriate,” Musalem said in remarks to the Brookings Institution in Washington. “However, I believe there is limited room for easing further without policy becoming overly accommodative, and we should tread cautiously” on further reductions.
The Dot Plot Findings
The full Federal Open Market Committee (FOMC), in its “dot plot” grid of future rate projections, shows that one official wanted no cuts this year, including last week’s, and eight others were content with just one more.
A slight majority, however, saw the need for at least two more cuts, implying one each at the two remaining meetings this year.
In his comments, Musalem said he sees financial conditions are “supportive,” is still concerned about the inflationary impact of tariffs and considers the current federal funds rate, now targeted between 4%-4.25%, as “close to neutral,” a level that neither boosts nor restricts economic growth.
Atlanta: No More Cuts
Separately, Federal Reserve Bank of Atlanta President Raphael Bostic indicated he does not anticipate further interest rate cuts this year, citing persistent inflation as a primary concern.
Bostic, however, is not a voting member of the FOMC.
“I am concerned about the inflation that has been too high for a long time,” Bostic told the Wall Street Journal. “And so I today would not be moving or in favor of it, but we’ll see what happens.”
He further told the Journal that while economic risks have shifted toward employment, the specter of elevated inflation remains front and center for policymakers.
Minneapolis: More Cuts Possible
Minneapolis Fed President Neel Kashkari indicated, however, that additional rate cuts are possible and cited his concerns about the labor market while downplaying the inflationary impact of tariffs. He supported the recent rate cut and advocated for further reductions at the Fed’s final meetings of the year.
