St. Louis Fed's Musalem Says More Rate Hikes Will Be Needed to Bring Inflation to Target

St. Louis Fed President Alberto Musalem said on October 8, 2026 that "more monetary policy firming will be required" to bring inflation back to target in a timely manner, speaking at a Bloomberg fixed-income event in New York. He said inflation remains elevated and is being driven by persistent demand pressures and negative supply shocks, and that the Fed needs to prevent a further broadening of inflationary pressures or second-round effects. If "timely" means something like 18 months, he said, rates ought to be going up further, a path Bloomberg summarized as increases over the next 6 to 9 months.

Musalem stopped short of backing a move at the Fed's October 27-28 meeting, saying he would go in with a very open mind. The federal funds target range stands at 3.75%-4.00%, and traders broadly expect no change in October and the next hike in December. He is not a voting member of the rate-setting committee this year, and other officials have sounded less urgent: New York Fed President John Williams and Vice Chair Philip Jefferson recently suggested no need to act quickly.

He also pushed back on the idea that the recent rise in bond yields has done the Fed's work for it. Musalem said financial conditions remain accommodative, and that higher yields reflect expectations for higher real rates as heavy government borrowing and strong tech-sector investment compete for capital, not lost Fed credibility. He described the federal government as having been on an unsustainable fiscal path for the better part of two decades.

What to watch: whether voting members echo Musalem's call before the October 27-28 meeting, incoming inflation data that could move December pricing, and Treasury yields, which he does not see as a substitute for further hikes.