St. Louis Fed President Alberto Musalem said in a broadcast interview on Thursday he would have supported raising the federal funds rate at the July meeting if he had had a vote on the Federal Open Market Committee this year.

“My sense is that monetary policy is neutral or accommodative,” he said in the interview on CNBC. “When I look at the real policy rate, it is below where the committee believes the neutral long-run rate ought to be. Our policy rate, in real terms, is also below market interest rates.”

Furthermore, financial conditions, both in prices and quantities of financing, “are pretty accommodative,” he added.

Inflation is high for two reasons — a sequence of supply shocks and also persistent demand forces, partly driven by the AI buildout. Moreover, a super El Niño could add another shock in the fall.

Underlying inflation, when stripping out supply shocks, is still running at between 2.5% and 3.0%, “which is too high,” Musalem said. “We need to bring inflation back down to 2% over the next 18 months.”

“Earlier, more gradual interest rate increases are preferable, better, less disruptive than later, potentially larger, potentially more abrupt increases,” he said.

Regional Fed presidents, except for the New York Fed president, rotate for voting spots on the FOMC. The St. Louis Fed president will next vote in 2028. The New York Fed president is a permanent voting member.