Fed’s Musalem: Caution Warranted as Inflation Pressures Persist
- Caution warranted in the face of upward inflation pressures
- Risky to rely on higher productivity growth to solve today’s inflation problem
- AI productivity effects remain inconclusive, while demand pressures are real
- Fed’s real policy rate is below the long-run neutral rate
- Longer-term inflation expectations are drifting higher
- Labor market remains stable
- Prepared to adjust policy views if evidence clearly shows higher productivity growth is likely to ease inflation pressures