Fed’s Logan urges two further rate hikes, says pause will not change course

“at least two more quarter-point rate hikes” are necessary, Dallas Federal Reserve President Lorie Logan said on Friday. While forgoing a rate increase “doesn’t change policy destination,” she said, moving interest rates “gradually” lowers the risk of a sharp deterioration in the economy.

Describing rising inflation as “unacceptable”, Logan also said that, following 50 basis points of rate increases, “a pause would make sense” to assess the next steps.

Logan sets out the policy outlook:

At least two further quarter-point rate increases are needed from the Fed

The ultimate policy destination remains unchanged if a meeting is skipped

The risk of a sharp economic downturn can be reduced by adjusting policy gradually

Households, businesses and investors can adapt to higher rates more easily when policy changes are gradual

A modestly restrictive policy stance is the ultimate objective

Clarifying the eventual policy rate helps the economy adjust and benefit from a skipped increase

Inflation's failure to move back towards the Fed's 2% target is 'Unacceptable'

A pause after 50 bps of rate increases would make sense to assess which further measures are appropriate

The economy is receiving support from financial conditions

Rising market rates signal investors' belief that monetary policy still has work to do

Despite an increase, long-term rates are exerting less of a drag on the economy than might be expected

Solid consumer spending accompanies strong economic growth

The labour market remains balanced, though it may be tightening slightly