Fed's Musalem Calls for Further Rate Hikes to Bring Inflation Back to 2% Target

St. Louis Federal Reserve President Alberto Musalem said Thursday that the U.S. central bank will need to raise interest rates again to return inflation to its 2% target, though he declined to commit to action at the Fed's October 27-28 meeting. "To bring inflation back to target in a timely manner, more monetary policy firming will be required," Musalem said at a Bloomberg event in New York, suggesting rates should rise over the next six to nine months. He is not a voting member of the Federal Open Market Committee this year. Traders broadly expect the Fed to hold its policy rate in the 3.75%-4.00% range this month, with the next hike now anticipated in December after New York Fed President John Williams and Vice Chair Philip Jefferson signaled no urgency to act. Musalem also warned the U.S. government has been on an "unsustainable fiscal path" for nearly two decades, saying heavy borrowing poses economic risks.