Additional policy easing may be needed over timeThere is uncertainty over neutral rate, it could be between 3-4%Expects moderation in economic growth and hiringLabor market no longer a source of inflation riskMonetary policy is well positioned for what lies aheadToo much policy easing carries risksFed is currently well-above neutral
Musalem is a 2025 vote and he’s heading into the new year on a hawkish note. That’s not a surprise as he’s been more of a hawk since he got the job.
Fed funds is at 4.50-4.75% and the market is pricing in a 70% chance of a cut. The ISM services report and the Beige Book later today could swing those odds.
This article was written by Adam Button at www.forexlive.com.
