Alberto Moussallem, President and CEO of the Federal Reserve Bank of St. Louis, speaks at the New York Economic Club in New York City on February 20, 2025.
Brendan McDiarmid | Reuters
Two Federal Reserve presidents said Friday that interest rates need to be raised to rein in inflation.
Albert Moussallem of the St. Louis Fed said further rate hikes will be needed soon. Dallas Fed’s Laurie Logan also predicted that the Fed would need to raise rates at least two more times by a quarter of a point.
The officials’ comments provide the first insight into what Fed leaders expect next after the central bank decided on Wednesday to keep interest rates on hold for now. The comments are likely to strengthen the belief among investors that the Federal Open Market Committee will return to raising interest rates at its next meeting in December.
According to CME’s FedWatch tool, federal funds futures traders are pricing in about a 76% chance that the Fed will raise interest rates by a quarter of a percentage point at this meeting.
“We have determined that additional monetary policy tightening will be needed, and in the near future,” Moussalem said in prepared remarks to the shadow open market committee, a group of economists focused on the New York central bank.
“Gradual adjustments made earlier are usually less disruptive than large, sudden actions made later,” Mussallem said. “Acting earlier and in smaller steps while inflation expectations are fixed is more likely to succeed without harming the labor market and economic growth.”
“Given the current outlook, it remains clear that the FOMC will need to raise rates by at least two more 25 basis points,” Logan said in remarks about an hour later.
Still, he said, that doesn’t mean the Fed has to raise rates every time it meets.
“Even if you miss the meeting, the goal of monetary policy will not change,” Logan told students at Davidson College in North Carolina, according to prepared remarks. “Certainly, by clarifying the destination, the FOMC can better support the economy’s adaptation and reap the benefits promised by Skip.”
“We believe it makes sense to pause and review economic and financial trends to determine whether further action is appropriate,” Logan said after two expected rate hikes.
Logan will be among the Fed officials voting on interest rate decisions in December. Musallem is expected to remain a non-voting member of the committee until 2028.
Inflation is “too high”
In his remarks, Mr. Mussallem spoke generally positively about the current state of the U.S. economy, calling it “resilient.” He noted that Thursday’s U.S. gross domestic product (GDP) data showed a faster-than-expected growth rate of 3.4%.
He said there are several factors boosting the economy, including increased artificial intelligence and “remaining accommodative” financial conditions.
Mr Musallem said the labor market was “very stable and balanced”. He noted that the unemployment rate of 4.2% is at the median of FOMC participants’ long-term forecasts.
But Mr Mussallem warned that inflation was “too high”, citing the personal consumption expenditure price index released on Thursday, which showed the annual inflation rate was above 3%. During a Q&A session at the event, Mr. Mussallem said he was keeping a close eye on core inflation and was alert to signs that current inflationary pressures were escalating.
Fed officials are closely monitoring consumer and investor inflation expectations to make sure they don’t rise much above the central bank’s long-term goal of 2%.
Mr. Mussallem said that unless the Fed adjusts monetary policy, a scenario in which inflation exceeds 2% is likely to persist into the future.
“The best thing that monetary policy can do for jobs and economic growth right now is to restore price stability in a timely manner,” Musallem said. “The short-term economic costs of curbing inflation are lower if central banks act before inflation is expected to take hold and persist.”
Two of the FOMC’s 12 voters opposed Wednesday’s decision to keep rates on hold: President Lisa Cook and Cleveland Fed President Beth Hammack, both of whom wanted the committee to raise rates by a quarter of a percentage point.
Former Fed officials will also be heard
Former Richmond Fed President Jeffrey Rucker said on CNBC on Friday that he, too, was in favor of raising rates this week.
“I’m surprised by the lack of urgency,” Rucker told Kelly Evans on CNBC’s “The Exchange.”Inflation has been at a high level of 3 or 3.5 percent for a long time. “Maybe they’ll show up in the next few meetings, but I’m surprised at the lack of urgency.”
December’s interest rate hike will be the second in 2026, after the FOMC decided to raise interest rates by a quarter of a percentage point in September. This is the first time the central bank has raised borrowing costs since 2023.

Former St. Louis Fed President James Bullard told CNBC that he doesn’t support Fed Chairman Kevin Warsh’s plan to make specific Fed meetings more focused on broad strategy rather than actual interest rate decisions.
Governor Warsh announced Wednesday that the Fed plans to hold two more Fed meetings in 2027 and 2028 to focus on larger policy discussions. Warsh said no interest rate decision announcements or Fed statements are expected at these adjustment meetings.
“I don’t think it’s a good idea to miss the meeting,” Bullard said. “If there was no conference, the world would be very unstable and action would have to be taken. In such a situation, a special conference would have to be convened.”
Mr. Rucker encouraged Mr. Warsh to take the opposite approach.
“If you want to reduce the pressure of individual meetings, have more meetings,” he said.
