After the US PPI data, two senior officials of the FED made important statements.

The president of the St. Louis Federal Reserve, Alberto Musalem, warned on Friday that there is a risk that inflation could accelerate even as the labor market shows signs of weakening. Speaking at an event in Hot Springs, Arkansas, Musalem warned that recent economic and policy developments, including changes in trade and finance, could lead to the dual challenge of rising prices and weakened employment. That risk, which was once regarded as less likely to occur, is now "closer to net profit levels," he said. "The uncertainty regarding the net impact and timing of new trade, immigration, financial, and regulatory policies on prices, employment, and economic activity is very high," Musalem said. "A scenario in which inflation rises and the labor market weakens simultaneously is a clear possibility that needs to be considered." Musalem stated that it is important to maintain stable long-term inflation expectations and called for continued close monitoring of input data. Musalem said: "I believe that monetary policy should remain cautious, carefully monitoring input data and comprehensively assessing the outlook and risks for employment and inflation." Musalem's comments came as some Fed officials signaled that they were prepared to keep interest rates unchanged in the face of potential inflationary pressures, particularly those related to tariffs stemming from President Donald Trump's policies. Musalem stated that he expects the current economic expansion to continue, although it may be slower. He cited falling stock prices and tightening financial conditions, including widening credit spreads, as factors that could slow growth if they persist. He also reiterated concerns that some price increases related to tariffs could have a lasting impact and the Fed may need to counter those effects with policy moves. However, he acknowledged the difficulty in detecting such impacts in real time. Musalem stated: "A second wave of inflationary impact may need to be guarded against," while noting that most long-term inflation expectations remain close to the Fed's 2% target, but a survey from the University of Michigan shows signs of increasing concern. Americans expect the average price to rise 4.4% over the next 5 to 10 years, the highest increase since 1991, according to data released on Friday. Short-term price growth expectations have also increased to 6.7%, the highest level since 1981. "The combination of high economic policy instability, tighter financial conditions, and retaliation from trade partners against U.S. tariffs poses a downside risk to economic growth and employment," Musalem concluded. "Ensuring that inflation expectations are well-anchored will provide a balanced approach to monetary policy with an appropriate focus on the mission of maximizing employment." New York Fed Chair John Williams stated that U.S. economic growth is expected to slow significantly due to tariff policies and reduced immigration, with real GDP growth likely to fall below 1%. Williams also predicted that the unemployment rate will rise from 4.5% to 5% next year, while inflation will increase from 3.5% to 4%.