Fed's Musalem: I don't see productivity growth in the macro data yet

Fed's Musalem: I don't see productivity growth in the macro data yet

Fed Official Musalem Highlights Lack of Productivity Growth in Macroeconomic Data
February 20, 2026

Federal Reserve official Adriana Musalem recently stated that measurable productivity growth remains absent from key macroeconomic indicators, signaling caution about its role in supporting inflation control and economic stability. In remarks consistent with recent central bank communications, Musalem emphasized that while productivity gains have been discussed as a potential offset to inflationary pressures, current data do not yet reflect sustained progress in this area.

Musalem's comments align with broader Federal Reserve caution regarding the relationship between productivity trends and inflation. Earlier this month, Fed officials reiterated that rising productivity alone cannot guarantee sustained inflation moderation, underscoring the need for continued vigilance in monetary policy. This stance reflects ongoing uncertainties about how labor market dynamics, input costs, and global economic conditions may influence productivity measurements in the near term.

The Fed's cautious approach also extends to potential rate-cutting decisions. In a separate statement, Musalem indicated that further reductions in interest rates would depend on sustained improvements in the labor market, including wage growth and employment levels. This conditional framework underscores the central bank's prioritization of data-dependent decision-making amid mixed signals in the economic outlook.

Meanwhile, the St. Louis Fed has explored alternative economic scenarios in recent analyses, highlighting risks from persistent inflation, geopolitical volatility, and uneven productivity growth across sectors. Such scenarios reinforce the Fed's reluctance to assume productivity gains will automatically stabilize price pressures without complementary policy actions.

For investors, Musalem's remarks suggest that monetary policy will remain focused on concrete economic outcomes rather than forward-looking assumptions. With inflation still above the Fed's 2% target and labor market conditions evolving, policymakers are likely to maintain a measured approach to rate adjustments in the coming months.

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