Comments from St. Louis Fed’s Musalem cross the wires:Without further policy restraint, it is more likely inflation will remain substantially above the 2% target 18 months from now.Interest rates likely need to rise further to tame inflation that is both demand- and supply-driven.Labor market stable around full employment and not a source of inflation pressure.Commodity shock is more than just oil, includes base metals like copper.Better for rate hikes to be “earlier and incremental” rather than “later and larger.”Even when stripping out supply-related factors, inflation is still “too high” at up to 3%.Business contacts say they are planning on price increases “closer to 3%.”Analysis: The message from Musalem is clearly hawkish. He believes inflation could remain well above the Fed’s 2% target without additional policy restraint, and he favors acting sooner with smaller rate increases rather than waiting and potentially having to move more aggressively later.For traders, the important distinction is that Musalem does not view inflation as solely the result of temporary supply disruptions. He sees pressure from both demand and supply, while reports of businesses planning price increases closer to 3% raise concerns that inflation expectations could remain sticky. That keeps the possibility of further Fed tightening firmly on the table.The market is pricing in a 55% chance of a Fed hike in October. This article was written by Greg Michalowski at investinglive.com.