1 hr ago
Dallas Fed chief says more rate hikes may tame inflation
The Federal Reserve is trying to slow down rising prices.
Dallas Fed President Lorie Logan said interest rates may need to go up at least another half percentage point.
The Fed’s most recent increase brought rates to 3.75–4 per cent.
Logan said inflation is still higher than the Fed’s 2 per cent goal.
She thinks inflation may not fall below 2.5 per cent without more increases.
However, some other officials think the Fed should wait and study new economic information.
Higher bond yields may already be slowing the economy.
If that happens, the Fed may not need to raise rates as much.
Officials will watch prices, jobs, growth, spending and financial conditions before deciding.
Dallas Fed President Lorie Logan said the Federal Reserve may need at least 50 more basis points of rate increases.
The Fed’s latest quarter-point hike raised its policy rate to 3.75–4 per cent.
Logan said inflation remains above the Fed’s 2 per cent target and may not fall below 2.5 per cent without further hikes.
Other officials, including New York Fed President John Williams, have urged patience while policymakers assess incoming data.
The 10-year US Treasury yield briefly reached a 24-year high of about 5.24 per cent before retreating.
- Who
- Dallas Fed President Lorie Logan, other Federal Reserve officials and financial-market participants.
- What
- Logan said the Federal Reserve may need another 50 basis points or more in interest-rate increases to reduce inflation.
- Where
- United States, including remarks delivered to Texas business executives and community leaders.
- When
- Following the Fed’s quarter-point rate increase last month; the article does not specify calendar dates.
- Why
- Inflation remains above the Federal Reserve’s 2 per cent target, and Logan said price stability must be restored.
Further Hikes Needed
Patience May Be Appropriate
Next policy move
Further Hikes Needed
Lorie Logan said the policy rate may need to rise another 50 basis points or more because inflation remains above target.
Patience May Be Appropriate
New York Fed President John Williams said the Federal Reserve has time to assess incoming data before raising rates again.
Market expectations
Further Hikes Needed
Logan said further increases could be needed to undo the Federal Open Market Committee’s rate cuts from last year and restore price stability.
Patience May Be Appropriate
Markets have reduced expectations of an October hike, while Goldman Sachs forecast a later December increase and said further hikes might ultimately be unnecessary.
Effect of bond yields
Further Hikes Needed
Higher long-term yields may reflect expectations of stronger economic growth and a higher Federal Reserve policy rate.
Patience May Be Appropriate
Higher term premiums may already be tightening financial conditions and slowing economic activity, potentially reducing the need for additional policy tightening.
Key facts
- Latest policy rate
- 3.75–4 per cent after a quarter-point increase last month
- Potential additional increases
- At least 50 basis points, according to Lorie Logan’s current estimate
- Federal Reserve inflation target
- 2 per cent
- Logan’s inflation outlook
- Inflation may not fall much below 2.5 per cent without further rate increases
- 10-year Treasury yield
- Touched a 24-year high before falling back to around 5.24 per cent
- Previous rate cuts
- The Federal Open Market Committee cut rates by 75 basis points over its final three meetings of last year
Quotes
Lorie Logan
President of the Federal Reserve Bank of Dallas
“Still, I currently estimate the target range needs to rise an additional 50 basis points or more to appropriately balance the outlook and risks for our dual mandate goals. We must restore price stability.”
firstpost.com
“I will continue to watch labor markets, prices, growth, consumption and financial conditions to evaluate whether policy is becoming restrictive”
firstpost.com
Sources
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