Fed's Musalem (2025 Voter, hawk) says he could support a path with another cut if more risks to the jobs market emerge and inflation is contained

Policy

• Sees limited space before rate cuts would make policy accommodative.


• Fed should not be on preset course and followed balanced approach.


• Important for the Fed to be cautious right now.


• Does not make decisions on one data point amid broader shutdown.


• In a particularly uncertain moment.


• It is premature what to say comes with FOMC meetings after October.


• Monetary policy is somewhere been restrictive and neutral.


• Financial conditions are accommodative.

Tariff

• Tariff impacts still flowing into the economy.


• Tariffs will work through the economy into the middle of next year.


• Retailers are feeling increased pressure to pass on tariff costs.


• Consumer facing firms are facing more trouble passing through tariffs.

Inflation/Economy

• Purchasing power is still an issue for many, inflation is still a very big thing for the consumer.


• It is important for the Fed to get inflation back to 2%.


• Some are saying non-interest rate related costs matter more right now.


• Tariffs do not appear to be passing through to services.


• Services inflation has been at a high level, needs more work to get it lower.


• Totally committed to 2% target, believes Fed supports the same.


• By H2, will move back towards 2% inflation but needs policy to lean against inflation.


• Consumption from all income groups has been strong, wealthy benefitting from wealth effects.

Labour

• Business contacts say job market has cooled.


• Labour market is not a source of inflation.


• Job market around full employment.


• Job gains have been affected by changes to immigration policy.


• Sees 30-80k job market breakeven rate (Musalem has said this before, differs to Powell's 0-50k estimate).

Could see negative payroll prints but unemployment may not move.

• Not seeing an increase in layoffs.


• Not in imminent problem for the job market but risks have increased.


• Data suggests risk of high unemployment is increasing.

Markets

• Equity prices not key part of thinking about the economy.


• Always have to worry about credit market risks.


• Some recent stress in credit markets is not tied to macro environment.


• Contacts say credit conditions are really good right now.

Fed Chair

• Low probability the next Fed Chair will not be qualified. 

17 Oct 2025 - 17:20- Fixed IncomeImportant- Source: Newswires