Fed's Musalem says half-point rate cut not warranted

Investing.com -- St. Louis Federal Reserve President Alberto Musalem stated that a half-point interest rate cut at the Fed’s September meeting is not justified by current economic conditions.

Speaking on CNBC Thursday, Musalem said such a substantial reduction is "unsupported by the current state of the economy and the outlook," noting that the country remains near full employment while inflation continues to run above the Fed’s 2% target.

His comments followed the release of new data showing higher than expected increases in wholesale prices in July, and came after Treasury Secretary Scott Bessent suggested that recent weak jobs numbers could prompt a larger rate reduction at the Fed’s September 16-17 meeting.

Musalem also expressed concern about the impact of higher import taxes, stating that businesses are still "right in the beginning of that window" for tariffs to influence prices. He indicated there is a "reasonable probability" that price pressures could prove more persistent than expected.

While acknowledging he has raised his assessment of risks facing the labor market, Musalem’s stance suggests resistance to aggressive monetary easing despite recent calls for more substantial action.