Fed’s Musalem says hiking rates now could save more aggressive action later
- Strong growth and investment is influencing bond market
- Fed credibility is not in question
- Fed is focused on making monetary policy independent of fiscal policy
- Monetary policy is neutral or accomodative right now
- Financial conditions are pretty accomodative here
- Number one concern of public is inflation
- Businesses are facing high input costs
- Super El Nino might be next supply shock
- Given current Fed rates, see lower probability of getting inflation to 2%
- Hiking rates now could save more aggressive action later
- Underlying inflation is between 2.5-3.0%, and it’s too high and must be lowered
- Productivity is seeing a recovery
- The best thing the Fed can do for growth is get inflation back to 2%
- Forward guidance is useful when rates are at zero
- Forward guidance suggests committment, communicating a framework is different
- When you have supply shocks, you have to look at core inflation
- Won’t prejudge upcoming FOMC meeting
This article was written by Giuseppe Dellamotta at investinglive.com.