Fed's Musalem Signals Conditional Support for October Rate Cut Amid Employment Concerns

Federal Reserve Bank of St. Louis President Alberto Musalem has expressed conditional support for an interest rate cut at the Federal Open Market Committee's October meeting, emphasizing a data-driven and flexible approach amid ongoing economic uncertainty. Musalem highlighted that his support for further rate reductions depends on labor market risks and inflation remaining under control, noting limited room for easing before policy could become overly accommodative. Despite the government shutdown delaying key economic data, the Fed is widely expected to lower rates by 25 basis points to stimulate a sluggish job market while maintaining enough tightening to combat inflation above the 2% target. Musalem cautioned that while another cut might be warranted, the Fed must remain vigilant against persistent inflation driven by factors such as tariffs, labor supply constraints, and sticky service prices. His stance reflects a broader Fed consensus balancing inflation control with concerns over economic growth and employment, with futures markets pricing in up to a 50 basis point reduction by year-end. Overall, Fed officials are navigating uncertain conditions by focusing on incoming data rather than adhering to a preset policy path.