MNI BRIEF: Fed's Logan Wants Lid On Inflation Expectations

Federal Reserve Bank of Dallas President Lorie Logan said Thursday the fed funds rate is well-positioned, but highlighted the importance of keeping tariffs from boosting inflation expectations. 

"For now, I believe the stance of monetary policy is well positioned," she said in opening remarks. "To sustainably achieve both of our dual-mandate goals, it will be important to keep any tariff-related price increases from fostering more persistent inflation." 

Regarding the economic outlook, higher-than-expected tariffs would very likely raise both unemployment and inflation, she said. "The persistence of the effect on inflation would depend on how quickly companies pass through cost increases and whether long-term inflation expectations remain well anchored." (See: MNI INTERVIEW: Fed Must Stay Hawkish Amid Tariff Shock-Kamin)

A sustained burst of inflation could lead households and businesses to expect further price increases, especially following the persistently elevated inflation in recent years, Logan said at the joint Dallas Fed/Peterson Institute for International Economics conference. "History teaches that when higher inflation expectations become entrenched, the road back to price stability is longer, the labor market is weaker and the economic scars are deeper."