Fed’s Musalem says no more rate cuts needed with policy now at neutral level

WASHINGTON, Jan 30 (Reuters) – St. Louis Federal Reserve President Alberto Musalem said on Friday the U.S. central bank does not need to cut interest rates further unless the job market starts to deteriorate or inflation falls.

The current 3.50%-3.75% policy rate range is neutral, Musalem said in remarks prepared for delivery to an event at the University of Arkansas. With the economy expected to continue growing above trend, there is no need to add monetary stimulus at a time when credit conditions and fiscal policy are both serving as “tailwinds,” he added.

“I see tailwinds supporting economic growth,” Musalem said. “With inflation above target and the risks to the outlook evenly balanced, I believe it would be unadvisable to lower the rate into accommodative territory at this time.”

Musalem said he expected inflation to decline towards the Fed’s 2% target from the current level about a percentage point above that level, but he also sees risks that it could persist. In addition, he said there is less risk now of a “substantial deterioration” in the job market.

(Reporting by Howard Schneider; Editing by Paul Simao)