Dallas Fed’s Logan calls for at least two more rate increases
Dallas Federal Reserve President Lorie Logan argued that US interest rates need at least two further quarter-point increases. Speaking in Houston, she said inflation remained too high while employment was near its sustainable maximum. Logan favoured a pause after those moves to assess whether further action would be needed.
Economics & Markets··Evening
Two increases, then a possible pause
Dallas Fed President Lorie Logan advocated at least two more quarter-point interest rate increases, followed by a possible pause.[1], [2]
Dallas Fed President Lorie Logan called for at least two further increases of 25 basis points in US interest rates. In her 10 November speech, she said a pause could follow to assess economic and financial developments. The pace could be faster over the winter. Her remarks set out her own policy preference following September’s increase and October’s hold.[1]
Inflation indicators remain elevated
Logan cited September core personal consumption expenditures inflation of 3.1 per cent. The New York Fed’s trend measure stood at 2.8 per cent and the Dallas Fed’s trimmed mean at 2.3 per cent. Prices in core services excluding housing and transportation rose 3.2 per cent. She argued that price pressures remained broad while employment was close to its maximum sustainable level.[1]
Real-rate assessment depends on estimates
Using a nominal federal funds rate of approximately 3.88 per cent and expected inflation of around 3.1 per cent, Logan calculated a real rate of 78 basis points. She compared it with model estimates for the neutral real rate ranging from 1 per cent to 1.85 per cent. Her calculation depends on inflation expectations; the neutral rate cannot be directly observed.[1]
