Dallas Fed president explains why she is pushing for interest rate hikes
At least two more interest rate hikes will be needed to effectively curb inflation, Dallas Fed President Lorie Logan says.
The comments from Logan, one of 12 voting members on the Federal Reserve’s Federal Open Market Committee, the influential body charged with setting national monetary policy, amounted to a forceful display of future public policy guidance two days after the group voted to hold rates steady.
Logan’s comments also came as millions of Americans are already voting in a high-stakes midterm election that’s revolved largely around affordability. On Wednesday, while acknowledging elevated inflation, the FOMC voted 10-2 to hold rates steady, with Logan voting for the majority.
But going forward, maintaining interest rates at their current level won’t be enough to tamp down rising prices, Logan told an audience of students at Davidson College in North Carolina on Friday.
“It remains clear to me, given the current outlook, that the FOMC needs to implement at least two more 25-basis-point rate increases,” Logan said, according to a transcript published by the Dallas Fed. “After that, it would make sense in my view to pause and examine economic and financial developments to determine what further action may be appropriate.”
Logan, a Federal Reserve veteran who has served as the Dallas Fed’s president since 2022, is known as a relative policy hawk and has previously stressed the need for higher interest rates — in contrast to President Donald Trump’s demands to lower them — as an antidote to the persistently high prices impacting Americans.
“More than five years after the post-pandemic surge, prices have continued to rise too rapidly,” Logan wrote in July, after she was one of three FOMC members who voted to raise rates at the time. “Every month of above-target inflation compounds the strain on the budgets of American families and businesses.”
At Davidson College, Logan’s alma mater, she reiterated her view that the FOMC — which is charged by Congress with a dual mandate of using monetary policy to achieve maximum employment and stable prices — was essentially achieving one of its goals but failing on the other.
Despite the “low-hire, low-fire” labor market, the country’s economic growth is strong, Logan said, and unemployment is low.
But the FOMC has missed its 2% annual inflation target for nearly six years, she said. “While inflation has come down from the post-pandemic peak, it is not yet headed all the way back to our target.”
“This is unacceptable,” she said, alluding to higher prices’ damaging impact on parents buying groceries, young people attempting to pay rent, companies planning investments and public financing. “We must restore price stability.”
Logan also advocated for a gradual approach that allows borrowers and the stock market to adapt to higher rates. She did not specify the timing she had in mind and also argued that timing was less important than clarity about the overall direction of policy.
“And skipping a meeting does not change the monetary policy destination,” she said, referring to rate pauses. “Indeed, by making the destination clear, the FOMC can better help the economy adapt and obtain the promised benefits of a skip.”
The Fed’s current target benchmark interest range is 3.75% to 4%. In September, the FOMC voted unanimously to implement a 25-basis-point hike, which represented the first rate hike in three years. The benchmark rates influence everything from auto loans and credit card rates to bond yields.
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This article originally published at Dallas Fed president explains why she is pushing for interest rate hikes.