By Michael S. Derby
NEW YORK (Reuters) – Alberto Musalem, an economist and former New York Federal Reserve staffer, has been tapped to become the new president of the St. Louis Fed, the regional bank said on Thursday.
Musalem, 55, succeeds James Bullard, who led the St. Louis Fed from 2008 until his unexpected resignation last July, when he announced he was leaving to become the dean of Purdue University’s business school. Musalem will start his new role on April 2.
Musalem recently served as co-chief investment officer and co-founder of Evince Asset Management and was also an executive vice president at the New York Fed between 2014 and 2017. He is currently an adjunct professor at Georgetown University and serves on the boards of the Federal Home Loan Mortgage Corporation and Man Group, roles the St. Louis Fed said Musalem will give up.
“As an experienced economist, former Federal Reserve leader, collaborator and communicator, he comes with the exceptional technical expertise and leadership abilities needed to contribute to effective policymaking and advance a large organization in service to the public,” St. Louis Fed Director Carolyn Chism Hardy said in a press release.
The incoming St. Louis Fed chief has big shoes to fill. Bullard was a very active voice on monetary policy and economic issues, and at points his comments were among the most market-moving of all U.S. central bank officials. Musalem will hold his first voting role on the rate-setting Federal Open Market Committee next year.
In his final stretch at the St. Louis Fed, Bullard was an early supporter of dialing back on the stimulus provided by the Fed during the coronavirus pandemic amid surging inflation, a path the central bank eventually embraced in an aggressive fashion.
Musalem will arrive as the Fed has almost certainly ended its rate hiking campaign amid a sizable moderation in inflation pressures. While financial markets are already betting on Fed rate cuts, policymakers are eyeing what they see as a very uncertain outlook and are still debating how long they’ll need to keep the central bank’s benchmark overnight interest rate in the current 5.25%-5.50% range to ensure inflation returns to the 2% target.
Fed officials also are contemplating the ongoing drawdown of the central bank’s $7.764 trillion balance sheet. The Fed is allowing nearly $100 billion in Treasury bonds and mortgage-backed securities to expire from its massive holdings and has shaved more than $1 trillion from its overall holdings.
With rate hikes likely done and liquidity draining from the financial system, the Fed is widely expected to stop the drawdown later this year, although policymakers have yet to give much guidance except to acknowledge planning may start soon.
(Reporting by Michael S. Derby; Editing by Paul Simao)
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