The most direct and least roundabout statement from a hawk! Fed's Logan calls for modest rate hikes

The most direct and least roundabout statement from a hawk! Fed's Logan calls for modest rate hikes.

Dallas Fed President Lorie Logan said on Thursday that although inflation data released this week had improved, they were still not satisfactory. She called for "modest" further increases in interest rates to win the battle against inflation that the Fed has been unable to win outright over the past five years.

Logan has a monetary policy vote on the Federal Open Market Committee (FOMC) this year. Logan stressed that inflation remains a major problem plaguing American households and that policymakers must take action.

Although other Fed officials have previously expressed support for continuing to raise interest rates if inflation indicators do not improve further, Logan is currently the official who has expressed the clearest and most direct call for an increase in interest rates.

"I currently believe that a moderate increase in interest rates will be more helpful in balancing the prospects and risks of the FOMC's dual mission goals (full employment and price stability).

Every month of inflation above the target level continues to increase the pressure on Americans' living budgets." Earlier this week, data released by the Bureau of Labor Statistics showed that U.S.

inflation has made some progress: the consumer price index (CPI) fell by 0.4% month-on-month in June, the largest monthly decline since April 2020; the producer price index (PPI) also fell by 0.3% month-on-month.

US CPI month-on-month changes Both indicators benefited mainly from falling international oil prices, with price growth also slowing in several key categories such as housing. Although inflation indicators fell back from the previous month in June, the CPI still rose by 3.5% year-on-year, and the PPI rose by 5.5% year-on-year.

Inflation has been above the Fed's 2% target since the start of 2021. Logan believes that the Fed still has a lot of work to do before achieving its inflation target. "One month of relief is far from enough. Now is the time to complete the mission of restoring price stability.

Monetary policy is like playing hockey and must skate to where the puck will be in advance.

Unfortunately, at present, it seems that inflation cannot continue to fall back to the 2% target level." According to federal funds rate futures pricing tracked by CME Group’s “FedWatch” tool, the market is currently widely expecting the FOMC to raise interest rates by 25 basis points later this year, possibly as early as September and more likely in October.

At the latest meeting at the end of July, the probability of raising interest rates was only 12%.

Logan pointed out that both the inflation indicators that are widely watched by the market and alternative indicators such as core inflation after excluding housing costs show that even with the recent decline in energy prices and the weakening of the impact of tariffs, inflation is still significantly higher than the Fed's target.

"If inflation cannot fall back to 2% on its own, then further policy tightening will be needed to help achieve this goal. If outside expectations for high inflation become solid, larger interest rate hikes will be needed in the future to bring it back to the target, which will also inflict greater costs on the job market.

Rather than being forced to tighten significantly in the future, it is better to tighten moderately now." It should be noted that Logan did not make it clear whether she would support an interest rate increase at this month's meeting, nor did she say how much more she thought rates needed to be raised. (

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