Fed's Musalem (2028 voter, hawk) says inflation is almost a full percentage point above target and the labour market cooling in an orderly way

• Base case outlook is economy grows at or above 2%.
• Financial conditions are accommodative, there is deregulation, and fiscal tailwinds
• Half of the excess inflation is from tariffs, which will fade as the year progresses.
• Job market is vulnerable to an increase in layoffs, not his base case but it could happen
• Inflation could stay higher for longer, this is not his baseline.
• Policy is neutral now in real terms.
• Policy is balancing appropriately
• Government shutdown may have biased CPI downward, and could stay that way through April; PCE inflation is a better gauge
• Bringing inflation down to target will help with consumption and growth, and could lower 10-year rate.
• Looking forward to learning what Warsh's priorities might be.
• Expects the Fed's commitment to its dual mandate to continue under a new chair

Musalem's comments underscore a hawkish stance, indicating that inflation remains significantly above target while the labor market displays signs of cooling. His emphasis on growth projections above 2% alongside accommodative financial conditions suggests that the Fed is in a delicate balancing act, which could impact future rate decisions, particularly if inflation persists beyond expectations.