Fed governor MUSALEM said on Monday that strong demand and commodity shocks
beyond oil may require further rate increases to bring down inflation. He urged
acting sooner rather than waiting, saying persistent demand and recurring supply
pressures are increasing inflation risk and that, absent further policy action,
inflation is likely to be materially above the 2% target in about 18 months. He
said policy must meaningfully constrain inflation to allow the Fed to reach its
target within roughly a year and a half and give time for tightening to work,
adding that earlier, gradual tightening is preferable to later, larger and
potentially abrupt moves. MUSALEM warned that inflation "is not a risk, it is
here," and that underlying inflation excluding oil and other supply-related
factors may be several percentage points above the Fed's target and is moving in
the wrong direction.
