Fed's Musalem: Oil Shock Could Keep Core Inflation Near 3%, Rates to Remain Unchanged for Some Time

Alberto Musalem, President of the Federal Reserve Bank of St. Louis, stated on Wednesday that high oil prices could push potential inflation over the remaining part of this year nearly one percentage point above the Federal Reserve's 2% target, suggesting the US central bank may need to keep interest rates unchanged.

"We might see some pass-through from oil prices to core inflation," he noted. By the end of this year, this potential indicator of price increases is expected to be "slightly below 3% or around 3%," compared to the Federal Reserve's 2% target, with risks of even higher levels.

The Federal Reserve may maintain the policy rate at its current range of 3.50%-3.75% for "some time" and observe inflation, employment, and economic data over the coming months. This view is shared by many of his colleagues. (Reuters)