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Michael Moskow Live on cnbc.com

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Iin a exclusive live interview on cnbc.com’s home page Monday at 9:01 a.m. ET, Michael Moskow, president of the Federal Reserve Bank of Chicago, said the "economy is solid " depite a "dramatic slowdown in housing", but that the Fed needs to be "very vigilant about inflation."

In an exclsuiver interview with CNBC’s Senior Economics Reporter Steve Liesman the regional Fed president discussed a vareity of economic issues, but steered clear of poviding any clues about the central bank's inteerst rate policy.

Moskow stunned Fed watchers and market mavens Friday, Dec. 1, warning about the possible need to raise short-term interest rates to head off inflation. Most investors had assumed the Fed had ended its two-year tightening cycle and would keep rates steady before lowering them sometime in 2007.

In speaking with CNBC.com, Moskow said the "real question going forward" is whether the housing slowdown "spills over to the rest of the economy."

On inflation, Moskow said inflation expectations "have been contained" and "hopes the core rate of inflation will subside next year."

Steve Liesman photo
Steve Liesman photo

Moskow’s market-moving comments last Friday came less than two weeks before the Federal Reserve’s FOMC meeting on Dec. 12 when it sets interest rate policy. Most Fed watchers expect the central bank to leave its benchmark rate – the federal funds rate – unchanged at 5.25% for the fourth straight time, after raising rates 425 basis points since June 2004.

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