Fed's Musalem (2028 voter) says he expects the economy to grow at or above potential in 2026

• Says inflation is closer to 3% than 2%, but expects it to ease this year. Adds that labour market cooling is in an orderly way.
• Today's inflation is encouraging and it will converge closer towards 2% this year.
• Materialising job market risks or a faster fall in inflation might make cuts more appropriate.
• Metrics shows labour market has shown some resilience despite unemployment claims and layoff announcement.
• Says unemployment is around neutral and job growth is around breakeven of 30k to 80k per month.
• Expects labour market to stabilise around current levels.
• Policy offers flexibility for responses in all direction.
• Committed to get inflation to target.
• Goods and housing inflation should ease in 2026.

• Companies are expressing cautious optimism about the economic outlook. Consumption is resilient and labour markets have normalised.
• Believes the US may be entering higher productivity phase but cautions it is soon to confirm.
• Deeper issues around housing affordability/supply, goes beyond mortgage interest rates.
• Economy expected to grow at or above potential, during 2026.

• Was in favour of a December rate cut but saw some slight risk of accelerating inflation.

• Current monetary policy is roughly at the neutral rate.
• Policy is well positioned to balance risks on both mandates.
• There's little reason for further easing of policy in the near term.
• Robust tailwinds, including fiscal and lagged impact of rate cuts, which will prompt growth.
• Unadvisable to have accommodative policy at this point.
• Accommodative policy is not advisable currently.
• Fed should not outsource rate decisions to assumptions about productivity.

• Chair candidates are all qualified, does not expect the reaction function to change significantly.

• On bill purchases, notes that QE intends to remove duration. Adds, current bill activity is very short-term.
• Situation, as it stands, is far shy of fiscal dominance and/or direct gov't financing.

Musalem's comments suggest a cautious but optimistic outlook for the U.S. economy, with growth expected to meet or exceed potential by 2026. His assertion that current monetary policy is appropriately neutral, and his reluctance for further easing, signals the Fed's commitment to tackling inflation responsibly while navigating the labor market's gradual cooling. Overall, this indicates a stable, albeit careful, approach to future monetary policy adjustments.