MNI BRIEF: Fed's Logan More Worried About Inflation Than Jobs
Federal Reserve Bank of Dallas President Lorie Logan said Tuesday she is more worried about persistently elevated inflation than further worsening in the labor market, and no further rate cuts would be needed if inflation comes down this year.
She added she supports the Fed's decision to buy Treasury bills to meet reserve demand and said the purchases should be responsive to growth and changes in the regulatory environment.
"We will learn in coming months whether inflation is coming down to our target and whether the labor market will remain stable. If so, this would tell me that our current policy stance is appropriate and no further rate cuts are needed to achieve our dual mandate goals," she said in prepared remarks.
"If instead we see inflation coming down but with further material cooling in the labor market, cutting rates again could become appropriate. But right now, I am more worried about inflation remaining stubbornly high. Fortunately, our policy is well-positioned to respond to risks to either of the FOMC’s dual mandate objectives."
Upside risks to inflation come from tariffs, core non-housing services prices and fiscal policies that boost growth this year, Logan said. Deregulation and new technologies like AI could also boost inflation in the near term even as they expand productive capacity over the long term, she said.
"It's uncertain how restrictive policy currently is," she said, adding the fed funds rate now "sits squarely within the range" of neutral real rate estimates of 1.08% and 2.09%.
The Fed's reserve management purchases are "natural next steps toward fully implementing the ample reserves regime we selected in 2019," Logan said. "The moves were technical decisions about the implementation of monetary policy, unrelated to the
stance of policy."
She encouraged banks to continue tapping the central bank's standing repo operations during times of funding stress. (See: MNI INTERVIEW: Fed Assets Hard To Shrink Due To Deficit-Hoenig)
