St. Louis Fed’s Musalem calls inflation the top concern as December hike odds near 77% after the jobs surprise

St. Louis Fed President Alberto Musalem said on Friday that inflation remained the top concern in his conversations with businesses⁴. Concerns over current inflation persist even though expectations remain anchored, Musalem said^5,6. He said that lowering inflation to 2% is a “necessary condition” and that it needs to be brought down on a “timely basis”⁸.

Chicago Fed President Austan Goolsbee said in a video posted by Wired that inflation is the “biggest problem” facing the economy¹².

Market odds of a December rate increase are near 77% after the jobs surprise². A rise in December is firmly on the table, as Musalem said inflation must return to target⁷.

Why it matters to investors

Recent economic data point toward another rate increase in December¹. Hiring rose sharply in October from September, which the Bureau of Labor Statistics now puts at 60,000 jobs after revisions¹⁰. Fed policymakers are considering a rate increase following the strong jobs report^4,9, having left the policy rate on hold last month⁹. The solid October report leaves inflation data and developments in financial markets to determine whether the Fed delivers the widely expected December move¹.

The Fed raised its target range by a quarter point in September to 3.75%-4.00% and held it on Oct. 28². At that meeting Governor Lisa Cook and Cleveland Fed President Beth Hammack voted for another rise³. Both wanted a quarter-point increase¹¹.

Borrowing costs are already high. Mortgage rates of 7.18% are punishing buyers, and a December 9 increase would add to the pain¹¹.

There is a counterweight. A more sustained AI selloff could argue against a December increase, with inflation data and developments in financial markets now deciding the outcome¹. Pressure from the AI selloff is moving into other markets².

What to watch

Inflation data comes first. The next readings will show whether the concern Musalem hears from businesses⁴ and the problem Goolsbee describes¹² are easing or deepening.

Markets are the second marker. If the AI selloff deepens, it could weigh against a move¹, while the 77% odds² show where investors stand now.

The Fed’s own split is the third. Cook and Hammack already wanted a quarter-point rise in October^3,11, and the December 9 decision¹¹ will show whether a majority now joins them. Musalem’s insistence that inflation come down on a “timely basis”⁸ sets out his own position ahead of that meeting.