Alberto Musalem

Some are related to other things like insurance, which is totally unrelated to tariffs.

And companies that are upstream, so earlier in the production process, are successful in passing on those costs to other companies to build products that they build.

Companies that are closer to the consumer and selling to the final purchaser of a good are having more difficulty in passing things on because they are facing some pushback from the final buyer.

I see the labor market as having cooled in an orderly way, both because supply and demand have cooled.

the latest challenger job announcements, which you're referring to, I definitely took notice of them, but they don't necessarily mean the labor market is about to go into a deterioration phase.

In the same week that they were announced, as you know, the weekly claims, which are

another very good indicator of layoffs, has remained stable so far.

So you have to look at all of the data in the labor market and see whether those layoff announcements will actually materialize.

So the traditional way to think about monetary policy is that it is more effective with respect to cyclical and demand side type of factors.

But I think we also need to be thinking if the economy is going through a structural transition, what role does monetary policy need to play in facilitating that transition?

So we have to, in my mind, be thinking about those two things.

The way I think about it is I feel we have adequate information to make decisions to cut rates or not to cut rates.

For me, it's about the outlook that I happen to have and the balance of risk that I happen to have with the information that I currently have.

So...

Going back to your first part of the question, in the past year, the real federal funds rate has declined by 250 basis points.

Of that, 150 basis points have been reductions in the nominal interest rate to provide insurance to the labor market and to get ahead.

of any deterioration in it and to keep the labor market around full employment.

And about 100 basis points of the decline in the real federal funds rate has been looking through the rise in expected inflation, mostly due to tariffs.

So that's how I think about monetary policy right now.

Not necessarily.