2025-11-06 22:43:00
Fed’s Musalem sees resilient US economy but flags tariff and deficit risks
Federal Reserve Bank of St. Louis President Alberto Musalem said the US economy has shown notable resilience despite uncertainty but faces ongoing challenges from tariffs, inflation pressures, and large fiscal deficits.
Speaking Thursday, Musalem said the labour market has “softened of late” yet remains close to full employment. He expects growth to slow in the fourth quarter but to rebound next year, saying the economy “should do well” as inflation gradually eases.
He acknowledged that tariffs are currently driving inflation higher, but said their impact would likely fade in 2026. The uncertainty around trade policy, he noted, has weighed on corporate sentiment, though firms closer to consumers have had limited ability to pass on higher costs.
Musalem said he anticipates a continued, gradual cooling in the job market, with some downside risks to employment, while seeing upside risks to inflation. He noted that the Fed’s dual mandate—supporting employment and keeping prices stable—remains “somewhat in tension.”
Despite those challenges, Musalem stressed that long-term inflation expectations remain well anchored, and reiterated the Fed’s commitment to maintaining that stability. He also cautioned that rising government deficits are on an “unsustainable path,” posing longer-term risks to fiscal and price stability.
