St. Louis Fed president says lowering inflation to 2% is a 'necessary condition'

Inflation needs to be brought down on a “timely basis,” St. Louis Federal Reserve President and CEO Alberto Musalem said Friday.

“When I go around our district, all I hear about is inflation,” Musalem told an audience at the St. Louis Art Museum during an event hosted by Greater St. Louis Inc.

These remarks come a week after the Federal Reserve voted to hold interest rates steady at 3.75% to 4% during its October meeting. Musalem is a non-voting member of the Federal Open Market Committee (FOMC), which sets the central bank’s rates.

The Fed’s target inflation rate is 2%, but inflation is currently running between 3%-3.5%, Musalem said. Last week, Musalem said inflation is too high and that “additional firming of monetary policy will be necessary, and soon.”

On Friday, Musalem said, “It's very important to recognize that stable prices, a 2% inflation target, is a foundational element, is a necessary condition to get maximum employment.

“The best monetary policy possible means commitment to the dual mandate of maximum employment and price stability,” he said.

Musalem said that inflation is impacting low-moderate income households more because wages are not growing at the rate they normally would be. Lower, moderate-income consumers are continuing to buy, but they're increasingly accessing credit or tapping their home equity to do so, Musalem said.

When asked about newly appointed Fed Chairman Kevin Warsh, Musalem said Warsh “has definitely put a stamp on the institution” and comes with “very well-formed ideas.”

Warsh was nominated to the position by President Donald Trump in March. Previous Fed Chair Jerome Powell faced multiple attacks during his tenure from the Trump Administration, with many instances of Trump calling for Powell’s termination.

Musalem called Warsh an advocate and a steward of the role the central bank plays.

“He'd been at the Fed before, so he had a good baseline to build from,” Musalem said. “He is asking some very deep, important questions.”

The St. Louis Federal Reserve named Musalem as its new president and CEO in 2024 after previous president Jim Bullard resigned in 2023 to become dean of the business school at Purdue University.

Musalem was reappointed by the Fed last December and started a new five-year term in March.

The St. Louis Fed is headquartered in St. Louis and serves the central bank’s Eighth District, which includes Arkansas and parts of Missouri, Indiana, Illinois, Kentucky, Tennessee and Mississippi.

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