Feb 25 (Reuters) – St. Louis Federal Reserve President Albert Musalem on Wednesday said he feels the current setting of the U.S. policy rate appropriately balances the current economic risks, even as his baseline outlook calls for inflation to head back down toward 2% later this year and for the labor market to stabilize.

“If there were an increase in layoffs with low job creation, you could have a risk of the labor market to deteriorate further; it’s not my base case, but I think it could happen,” Musalem said. “On the inflation side, there is a possibility that inflation could stay higher than we would all like it to be for longer … these two risks in my assessment are roughly balanced right now.”

(Reporting by Ann Saphir; Editing by Chris Reese)