The Federal Reserve is likely to raise interest rates further in an effort to bring inflation under control, according to St. Louis Fed President Alberto Musalem. Speaking from Washington, Musalem emphasized the need for earlier and incremental policy tightening to address inflationary pressures stemming from both robust demand and ongoing supply shocks.

Musalem noted that inflation remains elevated due to persistent demand as well as recent commodity price increases extending beyond oil. He highlighted that inflation is currently running well above the Fed’s 2% target, and without additional policy measures, it is more likely to remain substantially above that level over the next 18 months.

“It’s crucial that policy puts a meaningful restraint on inflation,” Musalem said, explaining that further rate hikes would allow the inflation rate to return to target within approximately a year and a half. He argued that acting sooner with smaller, incremental policy adjustments would be preferable to delaying action, which could require more abrupt and potentially disruptive measures in the future.

Although Musalem is not a current voting member of the Federal Open Market Committee, which sets monetary policy, he refrained from specifying the timing or extent of possible future rate increases. However, he warned that inflation remains a present challenge rather than a future risk and pointed out that even when excluding the effects of oil and other supply shocks, underlying inflation is about one percentage point above the desired target and moving in the wrong direction.

Recent data confirms the difficulty in reducing inflation to the Fed’s goal. The Personal Consumption Expenditures Price Index, the Fed’s preferred inflation gauge, measured 3.7% year-over-year in July, compared with a recent low of 2.3% in April 2025. Inflationary pressures have been exacerbated by a series of events, including global import tariffs introduced during the Trump administration and more recently, geopolitical tensions arising from the U.S.-Israeli conflict with Iran. These have driven fuel prices, particularly diesel, to record highs.

In addition to energy costs, prices of other commodities such as copper have surged, partly due to increased investment in artificial intelligence technologies, according to Musalem. These factors have compounded the challenges faced by policymakers in returning inflation to the target range.

While no specific policy decisions have been announced, Musalem’s remarks underscore the Fed’s ongoing concerns about inflationary risks and the importance of timely intervention to stabilize prices without causing unnecessary economic disruptions.