St. Louis Fed President: Fed's target is nearing achievement, policy should remain "moderately restrictive"

St. Louis Fed President Mousarlem stated that the Fed's inflation and employment goals are nearing achievement, but he emphasized that policies should remain "moderately restrictive" as long as the inflation rate remains above the Fed's 2% target. Mousarlem said in a speech prepared for the Memphis Economic Club on Wednesday, "Monetary policy is currently in a favorable position, and by gradually adjusting policy rates closer to neutral levels, inflation is expected to return to target levels and support maximum employment, provided inflation continues to fall towards 2%." Neutral rates refer to policy rates that neither promote nor suppress economic growth. He added that the Fed can "cautiously and patiently" assess upcoming economic data to make decisions regarding further interest rate cuts. Fed officials cut rates by another quarter point last week, marking the second consecutive rate cut. Mousarlem stated that the recent cuts "have reduced but not eliminated the restrictiveness of policies." He further noted, "Based on current information, in my baseline scenario, I expect inflation to move closer to 2% in the medium term, the labor market to cool further but remain within full employment range, and wage growth to become more moderate." Mousarlem believes that this baseline scenario reflects the need for "moderately restrictive" monetary policy in case of inflation above 2%. However, Mousarlem also mentioned that recent data shows an increased risk of inflation stopping or even rising. On the other hand, the risks of deteriorating labor market conditions remain unchanged or may even decrease. Data released earlier on Wednesday showed that core inflation in the US remained strong in October. The core Consumer Price Index (CPI), excluding food and energy costs, rose by 0.3% for the third consecutive month. The overall CPI (including food and energy) increased by 2.6% year-on-year, marking the first annual acceleration growth since March. Mousarlem stated that these data indicate that core inflation "remains high." Following the release of this data, investors increased their expectations that the Fed would cut rates by another quarter point at the next meeting in December, in line with economists' predictions. Mousarlem also mentioned that the current labor market is close to full employment, with low unemployment and layoff rates. He described it as a cooling labor market but with no clear signs of deterioration.