Fed presidents say more rate hikes likely to tame inflation

Two Federal Reserve presidents said interest rates will need to rise again to rein in inflation. St. Louis Fed chief Alberto Musalem warned that another hike is needed soon, while Dallas Fed president Lorie Logan said the Fed will have to raise rates by at least two more 25‑basis‑point steps. The comments came after the Federal Open Market Committee left rates unchanged on Wednesday, a move that kept markets watching for the next decision in December. FedWatch futures on the CME show about a 76% chance that the committee will add a quarter‑point hike at that meeting.

Reaction

Musalem made his remarks at the Shadow Open Market Committee in New York, arguing that small, early adjustments are less disruptive than larger moves later and that keeping inflation expectations anchored improves the odds of success without hurting jobs or growth. Logan spoke to students at Davidson College in North Carolina, noting that skipping a meeting does not change the policy destination and that a clear path helps the economy adapt. She added that after the two expected hikes, a pause to review economic and financial developments would be sensible.

What's Next

Logan will vote on the December decision, while Musalem remains a non‑voting member of the FOMC until 2028. Musalem highlighted a resilient economy, citing Thursday’s GDP figure of 3.4%, AI‑driven investment and accommodative financial conditions. He said the labor market is stable with unemployment at 4.2%, but warned inflation is still too high, with the personal‑consumption‑expenditures price index above 3% and core inflation under close watch.

Context

The Federal Reserve uses interest‑rate changes to meet its dual mandate of stable prices and maximum employment. Raising rates makes borrowing costlier, which can slow demand and pull inflation down, but the timing and size of hikes are balanced against the risk of slowing the economy too much.