Fed's Logan: Open for Rate Hike, If Inflation Hasn't Returned to 2%
Federal Reserve Bank of Dallas President Lorie Logan said the Fed may need to raise interest rates later this year to bring inflation back to its 2% target. At an event in El Paso, Texas, Logan assessed that the labor market is "fairly balanced," AI investment is booming, and financial conditions remain "loose," suggesting current monetary policy is not enough to sustain the economy.
Logan emphasized that inflation appears to have not yet moved back to 2% and risks becoming "entrenched" if it persists for too long. He said keeping inflation expectations anchored is important because if the public begins to believe inflation will remain high, the costs of controlling it could become even greater.
Logan's statement comes amid growing concerns within the Fed that inflation—which has been above target for more than five years—is starting to rise again. The Iran war is said to have added pressure through rising energy prices due to tight supplies, while other prices such as rent and food are also rising. The Fed's preferred PCE inflation rate was recorded at 3.8% year-on-year through April.
Logan is among the more hawkish officials in her communications. He rejected language in the Fed's April statement that suggested a cut was more likely than a hike, opting instead for more neutral language, wanting to keep the option of a hike open if inflation didn't fall as expected.
That same day, New York Fed President John Williams took a different tone: he considered current policy "appropriate" and didn't see a need to raise or lower interest rates at this time, and said the future path was unclear. This contrast suggests the market is still facing a highly data-dependent Fed, especially amid the energy shock.
Logan also touched on inflation measures that "filter out" volatile components. He warned that the Dallas Fed's trimmed mean measure—which had been praised by Fed Chairman Kevin Warsh—was likely underestimating the reading due to technical factors. Overall, Logan assessed that inflation was trending toward the "mid-2%" but had not yet returned to 2%, leaving room for additional tightening if price pressures did not cool. (arl)
Source: Newsmaker.id
