St. Louis Fed’s Musalem Warns Tariff-Driven Inflation May Persist

St. Louis Federal Reserve President Musalem said inflation is running close to 3 percent, leaving it about one percentage point above the central bank’s 2 percent target. He told CNBC that newly imposed tariffs are contributing to the higher readings. Musalem estimated that most of the tariff-related price pressures should recede within six to nine months, or roughly two to three quarters, but cautioned that the impact could linger longer than expected. The policymaker added that after only three months under the higher levies, there remains a ‘reasonable probability’ the drag on inflation proves more persistent. While the U.S. labour market remains near full employment, Musalem flagged emerging downside risks and noted the tariff pass-through to core goods and services is still muted. Given the current economic backdrop, he said the outlook does not justify a 50-basis-point interest-rate cut.