Fed's Musalem Expects US Economic Rebound After Q4 'Dip'

Bloomberg

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00:00Considering all the uncertainty we've had this year,

00:03growth through the first three quarters of the year

00:05is going to come out at about 1.8%,

00:07which is consistent with the long-term growth,

00:12potential growth of the economy.

00:13For the full year, I'm expecting growth

00:15to be slightly below longer potential.

00:17So the economy's been resilient.

00:20The late market has been around full employment.

00:23It has been softening some of late.

00:24Some of that softening is coming from the demand side

00:28of the late market.

00:28Some of this comes from the supply side.

00:31There are some downside risks to the late market.

00:34Talking about inflation, it's important to understand

00:37that inflation is running closer to 3%

00:39than to our 2% target.

00:42I'm sure we'll get into all the commentary about that.

00:46And looking ahead, I perceive an economy that

00:50after a dip in the fourth quarter,

00:52because of the shutdown,

00:54we'll recover after that into next year.

00:57We have financial conditions that are very supportive

01:00of economic activity in the labor market.

01:03We have deregulation.

01:06We need to have some effects.

01:08We have the lagged effects of our policy easing

01:12over the last year, which should be the pipeline.

01:15And we have some fiscal impulse into next year.

01:18So I expect the economy to do well next year.

01:22In terms of the inflation outlook,

01:25I believe the tariffs are having an impact on inflation.

01:30We can discuss more how much of that this has been through.

01:34I believe tariffs will fade by the second half of next year,

01:38and inflation will then return to a path towards 2%,

01:42provided we continue to have appropriate monetary policy.

01:47And on the labor market, what I'm expecting

01:49is a continued gradual cooling of the labor market,

01:52a labor market that will continue to be around full employment.

01:56But there are downside risks to that view,

01:58and there are upside risks in terms of the potential

02:02persistence of inflation.

02:03Thank you, Mr. Mayor.

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