Musalem says inflation concern persists, expectations anchored

St. Louis Fed President Alberto Musalem said people remain concerned about inflation at the current level. He said inflation expectations remain anchored. The Fed, he said, must return inflation to 2% on a timely basis.

Energy shocks and AI spending

Musalem attributed the current excess inflation to energy shocks and the buildout of artificial intelligence infrastructure. He said consumption and investment are growing fast on an optimistic outlook. He argued that AI will bring much higher productivity, and that data center construction is adding to strong demand.

Musalem’s remarks point to demand as well as energy costs as the source of the pressure.

Communication and policy transmission

Musalem said clear Fed communication helps policy move through the economy more smoothly. The US federal funds rate stood at 3.88 percent in force since 5 November, by our market data as of 03:11 GMT on 7 November. US annual inflation was 3.7 percent in September, near its 31-day high.

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Source: Federal Reserve  |  Data: FRED — St. Louis Fed