Fed's Musalem: More rate cuts likely but data will drive policy choices

Federal Reserve Bank of St. Louis President Alberto Musalem said on Monday that he supports additional interest rate cuts as the economy moves forward. Musalem further stated that performance will determine the path of monetary policy, according to Reuters.  

Key quotes

Further gradual reductions in the policy rate will likely be appropriate over time.

I will not prejudge the size or timing of future adjustments to policy.

Personal rate outlook is above the Fed's median view.

Given where the economy is today, I view the costs of easing too much too soon as greater than the costs of easing too little too late.

That is because sticky or higher inflation would pose a threat to the Fed's credibility and to future employment and economic activity.

Supported Fed's decision last month to cut rates by 50 basis points.

It is possible that inflation will cease to converge" on the 2% target.

But I believe the risks that inflation becomes stuck above 2% or rises from here have diminished.

Cooler job market is still consistent with a strong economy.

Financial conditions remain supportive of growth.

Some economic activity is slowed by rate policy, and election uncertainty.

Market reaction

The US Dollar Index (DXY) is trading 0.03% lower on the day at 102.45, as of writing.