Fed’s Musalem: Time may be approaching to slow or pause rate cuts

• Additional policy easing may be needed over time
• There is uncertainty over neutral rate, it could be between 3-4%
• Expects moderation in economic growth and hiring
• Labor market no longer a source of inflation risk
• Monetary policy is well positioned for what lies ahead
• Too much policy easing carries risks
• Fed is currently well-above neutral
• It’s possible to pause on cuts at upcoming Fed meetings

Musalem is a 2025 vote and he’s heading into the new year on a hawkish note. That’s not a surprise as he’s been more of a hawk since he got the job.

Fed funds is at 4.50-4.75% and the market is pricing in a 70% chance of a cut. The ISM services report and the Beige Book later today could swing those odds.

This article was written by Adam Button at www.forexlive.com.