St. Louis Fed President Alberto Musalem stated in a speech overnight that he expects inflation to converge toward the Fed’s 2% target over the medium term. His baseline scenario anticipates a cooling labor market that remains within the range of full employment, alongside moderating compensation growth.

Musalem emphasized that this outlook depends on monetary policy staying “appropriately restrictive” while inflation exceeds 2%, a situation that would allow Fed to “judiciously and patiently” continue lowering interest rates.

However, Musalem expressed concerns that recent information indicates the risk of inflation failing to converge toward 2%, or even moving higher, “has risen.”

Simultaneously, he noted that the risk of an unwelcome deterioration in the labor market “has remained unchanged or possibly fallen.”

Although he is “attuned to the possibility of rising layoffs going forward,” Musalem believes the overall strength of the economy “provides some confidence that a disorderly labor market deterioration is unlikely.”

Kansas City Fed President Jeffrey Schmid highlighted overnight Fed’s confidence that inflation is on track to reach its 2% target, attributing this progress to “signs that both labor and product markets have come into better balance in recent months.”

Schmid acknowledged that conditions are right to begin easing the Fed’s restrictive monetary policy but stressed that “it remains to be seen how much further interest rates will decline or where they might eventually settle.”

He added that sustained gains in productivity could enable the economy to grow robustly without significant inflation. However, Schmid cautioned that economic growth could be dampened if the energy supply fails to meet the increasing demands, such as those driven by AI development.

“As an optimist, my hope is that productivity growth can outrun both demographics and debt,” yet as a central banker, he remains committed to the Fed’s dual mandate, ensuring price stability and full employment, guided by data.

Dallas Fed President Lorie Logan emphasized today that while additional rate cuts will likely be necessary, “it’s difficult to be sure how many cuts may be needed and how soon they may need to happen.”

Logan also reiterated that the “neutral” rate—the level at which the interest rate neither stimulates nor restricts the economy—may be higher than initially estimated.

She suggested that the current rate is close to this neutral level, though precise measurement is challenging.

Minneapolis Fed President Neel Kashkari conveyed optimism about the current direction of inflation but emphasized the importance of waiting for additional economic data before making any policy changes.

Speaking to Bloomberg TV shortly after release of October CPI, Kashkari mentioned that although he hadn’t yet examined the details, the headline figures reinforced his confidence that inflation is moving favorably.

“I think that inflation is headed in the right direction. I’ve got confidence about that, but we need to wait,” he said. “We’ve got another month or six weeks of data to analyze before we make any decisions.”

Minneapolis Fed President Neel Kashkari pointed to inflation as the primary driver that could influence Fed’s policy direction at its next meeting. He stated that any decision to pause rate cut would require an “inflation surprise” before then.

“If we saw inflation surprises to the upside between now and then, that might give us pause,” Kashkari said at an event, noting that significant changes in the labor market are less likely given the limited time before the December meeting.

Kashkari reiterated that while the US economy remains strong, inflation has yet to fully return to the 2% target. He emphasized that it could still take a year or two to achieve this target, particularly given the lingering effects of housing inflation, though he noted recent cooling in that area as “encouraging.”

On the broader outlook for monetary policy, Kashkari described the current stance as “modestly restrictive,” suggesting that it is just slightly contractionary in effect. He acknowledged that the neutral rate remains uncertain but expected more clarity over the coming year as the Fed monitors the economy’s response to rate changes.

Richmond Fed President Thomas Barkin noted that the economy is “in a good place” and that Fed is now positioned to react flexibly to evolving economic conditions.

Speaking at an event overnight, Barkin highlighted that interest rates are balanced—elevated from recent lows but no longer at peak levels—providing Fed with room to adjust policy as needed.

Barkin observed that more price-sensitive consumer base is contributing to moderating inflation pressures, suggesting that demand adjustments are naturally aiding Fed’s inflation objectives.

Additionally, he pointed to the resilience of the labor market, with companies retaining employees and maintaining lower turnover rates, which has provided stability and boosted productivity.