Despite some signs of economic improvement in May, St. Louis Fed’s chief says rate cuts are likely quarters away, reports Barron’s:

“While Alberto Musalem, president of the Federal Reserve Bank of St. Louis, is optimistic that inflation will return to the central bank’s 2% annual target, he said it could take several quarters to get there. Rate increases aren’t off the table should it appear that progress is reversing.

“‘More evidence is needed to convince Musalem that slowing inflation is sustainable,’ he said.

“‘There are potential early signs of continued progress on inflation,’ Musalem said, pointing to favorable readings of the consumer price index and producer price index for May, after inflation stalled sideways in early 2024. ‘I am hopeful this could mark a resumption of progress toward 2% inflation. However, it takes more than one data point to establish a trend.’

“Musalem spoke on Tuesday at a CFA Society St. Louis luncheon in St. Louis, Mo. It was his first major policy address since he joined the St. Louis Fed in April. He will be a voting member of the Federal Open Market Committee—the Fed’s policymaking body—in 2025.

“The FOMC voted unanimously on June 12 to keep the federal-funds rate at a target range of 5.25% to 5.50%. Policymakers’ median estimate for where interest rates will be at the end of the year implied one quarter-point cut.

“‘I will need to observe a period of favorable inflation, moderating demand, and expanding supply before becoming confident that a reduction in the target range for the federal-funds rate is appropriate,’ Musalem said. ‘These conditions could take months, and more likely quarters to play out.’”

To read the entire Barron’s article, click HERE.