Fed's Musalem: Evidence Does Not Yet Justify Setting Policy On Expectation of Higher Productivity Growth
By Jessica Coacci
St. Louis Fed President Alberto Musalem said it is crucial that monetary policy put a restraint on underlying inflation, rather than tolerating somewhat higher price pressures today to pursue anticipated productivity growth.
"I am an AI and productivity optimist, but I recently argued that the evidence does not yet justify setting monetary policy on the expectation of higher productivity growth in the future," according to the published text of his remarks.
Speaking at an event in São Paulo, Musalem said a central bank's most valuable contribution to long-run growth is to supply the stable prices backdrop so firms can plan the investment and innovation that fuel economic growth.
In addition, Musalem said the Fed's dual mandate is written in terms of prices and employment, and does not reference raising the economy's long-run growth rate. Therefore, relying on easier policy now for eventual productivity gains takes for granted the credibility of monetary policy.
"Credibility, once lost, is expensive to rebuild," Musalem said.
Write to Jessica Coacci at jessica.coacci@wsj.com
(END) Dow Jones Newswires
August 06, 2026 17:47 ET (21:47 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.The articles, information, and content displayed on this webpage may include materials prepared and provided by third parties. Such third-party content is offered for informational purposes only and is not endorsed, reviewed, or verified by Morningstar.
Morningstar makes no representations or warranties regarding the accuracy, completeness, timeliness, or reliability of any third-party content displayed on this site. The views and opinions expressed in third-party content are those of the respective authors and do not necessarily reflect the views of Morningstar, its affiliates, or employees.
Morningstar is not responsible for any errors, omissions, or delays in this content, nor for any actions taken in reliance thereon. Users are advised to exercise their own judgment and seek independent financial advice before making any decisions based on such content. The third-party providers of this content are not affiliated with Morningstar, and their inclusion on this site does not imply any form of partnership, agency, or endorsement.
Popular
3 Stocks to Sell and 3 Stocks to Buy for November
3 of the Best Dividend Stocks to Own
The 10 Best Companies to Invest in Now
This Once-Hot AI Stock Now Looks Deeply Undervalued
United States