St. Louis Fed chief warns of possible rate hikes within next six to nine months

Alberto Musalem, president of the St. Louis Federal Reserve Bank, told attendees at Bloomberg's The Future of Fixed Income event in New York that inflation remains stubbornly high due to strong demand and adverse supply shocks. He said that returning inflation to the 2% target within an 18-month horizon would likely require the Federal Reserve to raise rates again sometime in the next six to nine months. Musalem clarified that he has not made a definitive call on the Fed's October 27-28 policy meeting, but stressed that the inflation outlook points toward further tightening.

Traders currently assign over an 80% chance that rates will stay unchanged at the October meeting, with roughly a 70% chance of a second increase in December. The Fed's September decision lifted the benchmark rate by a quarter point to a 3.75%-4% range, and officials indicated that additional hikes were probable before year-end. Musalem's comments add to the ongoing debate about the timing and magnitude of future monetary policy actions.