Fed: There are still real upside risks to inflation – Lorie Logan

The president of the Dallas Federal Reserve, Lorie Loganargued on Wednesday that he had supported last month’s substantial interest rate cut, but was in favor of smaller reductions in the future. He stressed that there were still “real” upside risks to inflation and noted “significant uncertainties” around the economic outlook.

Key Quotes

‘A more gradual path’ in rate cuts is probably appropriate from now on.
Upside risks to inflation mean the Fed should not rush to cut rates.
Reducing the policy rate gradually would allow time to judge how restrictive monetary policy may or may not be.
Normalizing policy gradually also allows the Fed to ‘better balance’ labor market risks.
Policy is not ‘preset,’ the Fed must be agile.
I supported the Fed’s decision to begin normalizing policy by cutting the policy rate.
A less restrictive policy will help avoid cooling the labor market more than necessary.
Progress in inflation has been widespread; The labor market has cooled, but remains healthy.
Inflation and the labor market are ‘a stone’s throw’ from the Fed’s objectives.
Recent trends in housing and other basic services inflation are ‘encouraging,’ expected to decline over time.
The US economy is ‘strong and stable,’ but there are ‘significant uncertainties’ around the outlook.
Stronger-than-expected spending and economic growth pose an upside risk to inflation.
An unwarranted additional easing in financial conditions could also throw demand and supply out of balance.
The ‘neutral’ federal funds rate is uncertain; Structural changes in the economy mean it could be higher than before the pandemic.
We must remain alert to inflation risks from supply chains, geopolitics and port strikes.
As the labor market has cooled, we face more risk of it cooling beyond what is necessary to return inflation to 2%.