Fed’s Musalem Signals Limited Room for Further Rate Cuts Amid Inflation Concerns

Federal Reserve Bank of St. Louis President Alberto Musalem has cautioned that the central bank is nearing its limits on rate cuts despite persistent inflationary pressures. Last week's 25-basis-point reduction was framed as a preemptive measure to safeguard a softening labor market, though Musalem emphasized rates remain in neutral-to-restrictive territory.

The policymaker left the door open for additional easing should employment conditions deteriorate further, but stressed the diminishing capacity for accommodative moves. His remarks underscore the Fed's delicate balancing act between supporting growth and containing price stability risks.

Market participants are parsing these developments for implications across asset classes, particularly in interest-rate-sensitive sectors. The commentary comes as traders reassess expectations for monetary policy trajectory through 2025.