Fed’s Logan cautiously optimistic on inflation, sees no need for cuts

Investing.com -- Dallas Federal Reserve President Lorie Logan expressed cautious optimism Tuesday that the current policy rate will guide inflation toward the Fed's 2% target while maintaining labor market stability.

Speaking in Austin, Texas, Logan indicated that if economic data confirms this trajectory in coming months, "our current policy stance is appropriate and no further rate cuts are needed to achieve our dual mandate goals.

Logan, who voted with the 10-2 majority at January's Fed meeting to maintain the policy rate at 3.50%-3.75%, noted that downside risks to the labor market "appear to have meaningfully dissipated" following last year's three interest-rate cuts. However, those cuts also created additional inflation risks.

With short-term borrowing costs now within the range of "neutral" policy estimates, Logan suggested they provide little restraint on an economy that has "rebounded strongly" and inflation that has exceeded the Fed's target for nearly five years.

"I anticipate we'll see progress on inflation this year," Logan said, citing expectations that tariffs' upward pressure on prices will fade, housing services inflation will continue slowing amid reduced rental demand, and labor market balance will ease pressures on non-housing services inflation.

She acknowledged some positive indicators, including declining short-term inflation expectations and businesses anticipating moderated costs and prices this year.

However, Logan expressed greater concern about "inflation remaining stubbornly high" than further labor market weakness. She listed several inflation worries, including upcoming tariff effects, fiscal policy and "buoyant" financial conditions providing economic tailwinds, and potential upward price pressures from deregulation and new technologies.

Logan noted that if inflation falls but the labor market cools significantly, "cutting rates again could become appropriate."

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