Fed Chairman Musallem: Interest rate policy will be data-driven, not just one meeting

Fed Chairman Musallem emphasized the need to assess the entire interest rate trajectory, rather than just focusing on the decision of a single meeting. He believes that inflation remains high compared to the target and poses a risk of being prolonged, while risks in the labor market are increasing but have not yet become evident.

According to Musallem, the upcoming employment report may or may not be sufficient to demonstrate the necessity for interest rate cuts, depending on its specific content. The Fed is currently maintaining a moderately tight policy and will continue to adjust its outlook on the interest rate trajectory until the September meeting.

He also noted that the inflation impact from tariffs is expected to gradually decrease, while not ruling out the possibility of the Fed pausing the rate-cutting cycle. However, if labor market risks continue to grow, interest rate policy may need to be adjusted more flexibly.