Fed's Musalem (2028 voter, hawk) says inflation is elevated and being driven by persistent demand pressures and supply shocks; key to bring inflation back to 2% in timely manner and limit second round effects

To bring inflation back to target, more monetary policy firming will be required. Goes into all meetings with an open mind. Current level of inflation requires Fed to think about rate increases. Rates ought to be going up in the next six to nine months. Contacts are mostly worried about inflation, does not see job market worries. Economy is pretty strong right now, best thing the Fed can do is lower inflation. Job market is overall balanced and stable, no need to cool job market to get inflation down. There is a risk consumer vigour could wane. Nominal yields are rising because real yields are rising in part due to rate expectations. Market inflation expectations remain anchored. Does not see Fed credibility questioned. AI investment and government deficit also pressuring yields higher. AI investment is affecting government borrowing costs. Hears from investors of some fiscal sustainability concerns. Strong demand for capital likely to keep rates higher than the used to be. US government been on an unsustainable fiscal path for years. It is possible government debt levels may eventually create risks. Fed does not focus on debt management. Important to keep government debt management and monetary policy separate. Financial conditions have tightened modestly but still are accommodative and supporting growth. Credit conditions are solid and good amid some slight issues in the market.