Fed's Musalem Calls for Further Hikes Despite Rising Bond Yields

Key Facts

1St. Louis Fed President Alberto Musalem stated that more monetary policy firming will be required to return inflation to 2% in a timely manner.

2Musalem argued that the sharp rise in bond yields has not yet tightened financial conditions enough to remove the need for further Fed action.

St. Louis Fed President Alberto Musalem stated that more monetary policy firming will be required to return inflation to the 2% target in a timely manner. Reuters reported that Musalem suggested interest rates ought to be going up further over the next six to nine months if the objective is to achieve the inflation goal within approximately 18 months.

Musalem argued that the sharp rise in bond yields has not yet tightened financial conditions enough to remove the need for further Federal Reserve action. He noted that financial conditions remain accommodative and supportive of economic growth, attributing higher yields largely to expectations for higher real rates in a strong economy and increased competition for capital.