WASHINGTON: Federal Reserve (Fed) Bank of Dallas president Lorie Logan says that while policymakers will likely need to hold interest rates steady for a bit longer to fully cool inflation, it is also possible they may need to pivot to cutting if inflation and labour markets soften.
“All this adds up, for me, to a base case in which monetary policy needs to hold tight for a while longer to bring inflation sustainably back to target – and in this base case, we can sustain maximum employment even with modestly restrictive policy,” Logan said Tuesday.
But Logan, who has been cautious about inflation during her three-year tenure as Dallas Fed chief, also opened the door to a scenario in which the central bank might have to cut rates earlier.
“It’s also possible that some combination of softer inflation and a weakening labour market will call for lower rates fairly soon,” Logan said in prepared remarks for an event in San Antonio.
Fed officials have left rates unchanged this year, adopting a “wait and see” approach to assess how tariffs impact prices. But policymakers are split on how to proceed the rest of the year.
In June the median estimate of the 19 officials called for two interest-rate cuts this year, while nine forecast just one cut or none. Minutes of that meeting showed the split was driven largely by differing expectations for how tariffs might affect inflation. — Bloomberg
