Fed's Musalem (2028 voter) says Fed's dual mandate is pro growth, via AEI event; if nominal interest rate comes lower, the 10yr yield will decline too
- Supply chain disruptions from the Iran war include helium, Aluminium, and fertiliser.
- Committed to getting inflation back to 2%.
- Need to demonstrate commitment to 2% inflation every day.
- Core services inflation has been high, goods inflation driven by tariffs.
- If you take away tariffs, you still have 2.5% inflation on 12-month basis.
- Taking steps to reduce demand for reserve from financial system would be smoother way to do it.
Context
Musalem's comments highlight the Fed's ongoing commitment to its dual mandate, emphasizing both growth and inflation stability. His assertion that lower nominal interest rates would lead to decreased 10-year yields suggests a dovish outlook, which could shape market expectations regarding future rate paths and overall risk sentiment. This stance will be closely watched as it may influence both the USD's strength and the direction of fixed-income markets.
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