Fed’s Musalem: Easing tariff impact will help lower inflation

Alberto Musalem, President of the Federal Reserve (Fed) Bank of St. Louis, said in an exclusive note he gave on Wednesday that the Oil shock caused by the Middle East war is likely feeding core inflation, he expects it to be near 3% throughout the year.

Key takeaways:

Oil shock likely feeding core inflation, expect it will be near 3% through end of year.

Supply shocks put Fed's inflation and employment goals at risk, current interest rate range likely appropriate 'for some time'.

Musalem says he has lowered his GDP estimates for the year to between 1.5% and 2% from 2% to 2.5% before the war.

Easing tariff impact will help lower inflation, housing inflation also moving in the right direction.

Musalem says he does not see clear impacts yet from war on consumption.

Unemployment rate could rise as economic growth slows, though perhaps only by a couple tenths of a percentage point.”