Fed’s Logan calls for rate hike ahead of July meeting
Investing.com — Dallas Federal Reserve President Lorie Logan became the first policymaker under Fed Chairman Kevin Warsh to publicly advocate for an interest-rate increase on Thursday, potentially setting up a dissent at the central bank’s meeting on July 28-29.
“Inflation has been too high, for too long, and does not appear to be on track all the way back to 2%,” Logan said in prepared remarks delivered in Houston. “I currently believe modestly higher interest rates would better balance the outlook and risks for the FOMC’s maximum employment and price stability goals.”
Logan’s position represents a growing minority within the Fed who believe maintaining current short-term borrowing costs is inappropriate given upside inflation risks and a strong labor market.
“The labor, consumption and financial data indicate that monetary policy is not restraining the economy,” Logan said. “If higher inflation becomes entrenched, we’d need sharper rate increases to bring it back to target, with a larger cost for the labor market. Better modest restriction now than severe restriction later.”
Consumer price inflation moderated slightly in June, Logan acknowledged, but she described the path back to the Fed’s 2% target as “tenuous.” “It is more a hope than a likelihood,” Logan said. “It is time to finish the job of restoring price stability.”
Logan pointed to several mounting inflation risks, including renewed Middle East hostilities that could reverse recent fuel price relief and the potential for AI investment to trigger broader price pressures.
While AI and other technologies may “eventually” generate productivity gains that boost supply and lower prices, Logan said the timing and scale remain uncertain. “The demand effects are here already. And when demand outstrips supply, the result is higher prices.”
Warsh became Fed chairman in May. At his first meeting in June, policymakers unanimously supported keeping the policy rate in its current 3.50%-3.75% range, though some saw a case for raising rates.
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