St Louis Fed’s Musalem more worried about inflation than jobs now, sees holding rates for ‘some time’

St Louis Fed president Alberto Musalem said Wednesday that inflation has become a bigger concern than the job market, and that it’s possible the central bank could hold interest rates steady “for some time.”

“The risks have been shifting towards more risk on the inflation side than the employment side,” Musalem said at the Mississippi Bankers Association 2026 Annual Convention in Alabama.

“There are very plausible scenarios under which the economy would require us to keep the policy rate at its current level for some time.”

Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments

He also sees “plausible scenarios” under which the Fed might cut or raise interest rates.

“So, a lot of uncertainty right now, and it’s important to see how things go,” he said.

The risks to the two sides of the Fed’s mandate have been shifting, he noted. Namely, the job market has stabilized as inflation worries grow. Inflation is running “meaningfully above” the Fed’s 2% goal, driven by the surge in energy prices from the Middle East conflict, tariffs, but also underlying inflation that, Mulsaem said, “we need to worry about as monetary policymakers.”

The Personal Consumption Expenditures index rose 3.5% in March on a headline basis, up from 2.8% in February before the war. On a “core” basis, which excludes volatile energy and food prices, inflation rose 3.2%, up from 3% in February. The reading showed that inflation was already sticky and is now over a full percentage point above the Fed’s 2% target.

Musalem said economic tailwinds — including fiscal policy support, deregulation, the Fed’s three rate cuts from last fall, a high stock market, and a demand boom from building AI — are stronger than the headwinds of tariffs and higher energy prices.

While Musalem sees the labor market as stable, he suggested that comments from companies and hiring managers indicate hiring would be stronger if not for the uncertainty surrounding the economy.

“The CEO of a major company that produces inputs for industrial manufacturing said to me recently that uncertainty is so high and that’s the reason why [he’s] not hiring,” said Musalem. “He said the best worker to fire is the one that I haven’t hired, because of the uncertainty.”

Jennifer Schonberger is a veteran financial journalist covering markets, the economy, and investing. At Yahoo Finance she covers the Federal Reserve, Congress, the White House, the Treasury, the SEC, the economy, cryptocurrencies, and the intersection of Washington policy with finance. Follow her on X @Jenniferisms and on Instagram.