Musalem says commodity shock now hits copper too, sees inflation still too high
Fed Vice Chair Musalem says business contacts are planning price increases near 3%, even after stripping out supply-side pressures.
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Federal Reserve Vice Chair Alberto Musalem said Monday that the commodity shock rattling markets has spread beyond oil into base metals such as copper. He said that even after accounting for supply-related factors, inflation remains too high, with business contacts telling him they plan price increases closer to 3%.
Musalem has warned that inflation could stay well above the Fed's 2% target without further policy restraint. His comments follow the Fed's first rate hike since 2023, which Fed Chair Schmid backed by citing inflation running above 3%.
The commodity strain Musalem referred to had already been building. Energy prices had jumped after Saudi Aramco halted crude sales to Europe, and diesel had climbed to $6.45 a gallon in the period that followed, before Monday's session.
Musalem's remarks add to a run of Fed messaging that inflation is sticky even once supply shocks are excluded, narrowing the case for pausing rate increases despite pressure from President Trump for cuts. With business pricing plans near 3% and demand-side inflation still elevated, officials are signaling that further tightening may be needed, a stance that runs against market hopes that the recent hike would close out the cycle.