Alberto Musalem, an economist and former New York Federal Reserve employee, has been tapped to become the new president of the St. Louis Fed, the regional bank said Thursday.
Musalem, 55, takes over after James Bullard, who headed the St. Louis Fed since 2008, unexpectedly resigned last July to assume the role of dean at Purdue University’s business school.
Kathleen O’Neill, first vice president of the Fed in St. Louis, will continue to serve as its interim leader until Musalem begins his new role on April 2.
Musalem will bring to the St. Louis Fed extensive market, public policy, and central banking experience.
Most recently, he served as co-chief investment officer and co-founder of Evince Asset Management, and was also executive vice president of the New York Fed from 2014 to 2017, focusing on the financial sector and broader policy issues. He also held a position as a partner and managing director at Tudor Investment Corporation and previously worked as an economist at the International Monetary Fund.
Musalem currently serves as an adjunct professor at Georgetown University. Additionally, he is on the boards of the Federal Home Loan Mortgage Corporation and the Man Group, roles he will be relinquishing for his new position at the St. Louis Fed.
He holds a Ph.D. in economics from the University of Pennsylvania and an MA and BA in economics from the London School of Economics and Political Science. Born in Bogota, Colombia, Musalem holds American citizenship.
“His background as an economist, former Federal Reserve leader, collaborator, and communicator brings impressive technical know-how and leadership abilities are necessary for effective policymaking and advancing a large organization for public service,” Fed Director St. Louis Carolyn Chism. Hardy said in a press release. Hardy, who is president and CEO of Chism Hardy Investments, LLC, led the regional bank’s presidential search committee.
INTO THE FIRE
The incoming head of the Fed St. Louis has big shoes to fill. Bullard has been an active voice on monetary policy and economic affairs, and his comments have at some points been among the most choppy of any U.S. central bank official. Musalem will take on his first voting role on the rate-setting Federal Open Market Committee next year.
In his last leg at the Fed in St. Louis Bullard was an early proponent of invoking pandemic-era central bank stimulus after a surge in inflation, a path the central bank eventually aggressively adopted.
Musalem arrives as the Fed almost certainly ended its rate hike campaign after inflationary pressures eased significantly. While financial markets are already betting on a Fed rate cut this year, policymakers are looking at what they see as an uncertain outlook and are still debating how long they will have to keep the central bank’s benchmark overnight rate. This move comes amidst efforts to align the current 5.25-5.50% range with the goal of bringing inflation back to the 2% target.
Fed officials are also considering continuing to draw down the central bank’s $7.764 trillion balance sheet. The Fed is letting the nearly $100 billion worth of Treasuries and mortgage-backed securities it holds expire each month and has trimmed more than $1 trillion from its holdings as it peaks at nearly $9 trillion in 2022.
With rate hikes likely and liquidity drained from the financial system, the Fed is widely expected to stop the taping later this year, although policymakers have yet to provide much guidance beyond conceding that planning could begin soon.
CHALLENGE OF LEADERSHIP
The Fed’s 12 regional banks are quasi-private institutions technically owned by member banks and operating under the supervision of the Fed’s Board of Governors in Washington. Regional banks gather local economic information, help oversee regulated financial institutions, and contribute to monetary policy decisions.
The Fed’s regional banks have long faced criticism for the lack of transparency in their leadership selection processes. Unlike the governors of the Fed or the head of the US central bank, who are appointed by the president and confirmed by the US Senate, it is generally not known to the public who is running for the leadership positions of the regional Fed.
The central bank’s internal watchdog said in a recent report that it would look into the selection process for regional bank leaders, noting that “consideration of diversity and inclusion” would be included.
The Fed has also encountered substantial external pressure in recent years to diversify its top management roles. Regionally, Atlanta Fed President Raphael Bostic became the first African-American to head one of the Fed’s banks in 2017, and Boston Fed President Susan Collins became the second in 2022.
