Fed must keep tariffs from fostering persistent inflation: Logan

(Reuters) - Higher-than-expected tariffs would "very likely" raise both unemployment and inflation, Dallas Federal Reserve President Lorie Logan said on Thursday in remarks that made clear her most immediate concern is keeping inflation, and inflation expectations, in check.

"To sustainably achieve both of our dual-mandate goals, it will be important to keep any tariff-related price increases from fostering more persistent inflation," Logan said in comments prepared for delivery to a Peterson Institute for International Economics event on trade and immigration. "For now, I believe the stance of monetary policy is well positioned."

Logan did not address U.S. President Donald Trump's decision on Wednesday to temporarily scale back most of the steep tariffs he had announced just a week earlier, though she did nod to "volatile" financial market prices as investors digest the economic implications of trade and other Trump administration policies and the uncertainties around the policies themselves.

Her speech text was finalized before data on Thursday showed consumer prices rose 2.4% last month compared to a year earlier - less than expected - but it's unclear if that data would have given her much comfort as it likely captured only a small part of the impact of new tariffs.

"The persistence of the effect on inflation would depend on how quickly companies pass through cost increases and whether long-term inflation expectations remain well anchored," Logan said, noting that when higher inflation expectations become entrenched, it takes longer to bring inflation down, the labor market is weaker, and the economic scars are deeper.

"A sustained burst of inflation could lead households and businesses to expect further price increases, especially following the persistently elevated inflation in recent years."

(Reporting by Ann Saphir; Editing by Andrea Ricci)

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