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Senior Federal Reserve officials indicated on Thursday that the US central bank will maintain interest rates at its September meeting, while refraining from declaring victory in their battle against inflation.
Lorie Logan, president of the Dallas Fed and a voting member on the Federal Open Market Committee, expressed support for the central bank’s decision to keep its benchmark rate at a 22-year high during the upcoming FOMC gathering.
“I’m not yet convinced that we’ve eliminated excess inflation. However, achieving 2 percent inflation in today’s complex economic environment will require a carefully calibrated approach, not just an abundance of caution,” she said at a Dallas Business Club event.
Logan praised the decision made at the June meeting to slow down the pace of rate hikes, which saw the Fed skip an increase only to resume tightening in July.
“Another pause may be appropriate when we meet later this month,” she added.
In addition to acknowledging the tightening of financial conditions, Logan, known as one of the Fed’s most hawkish officials, also said that momentum in the labor market and the economy remains strong.
Logan’s comments echoed those of John Williams, president of the New York Fed and a permanent FOMC voter. Williams stated on Thursday that monetary policy is in a “good place”.
Williams emphasized that the Fed will closely analyze incoming data to determine if the fed funds rate is sufficiently restrictive to control inflation in a timely manner.
Logan made it clear that the Fed may need to tighten money supply later in the year, emphasizing that the recent easing of price pressures does not necessarily mean that inflation is low enough. She stated that there is still work to be done.
After 11 interest rate hikes since March 2022, the federal funds rate currently hovers between 5.25-5.5 percent. Federal Reserve Chair Jay Powell has also emphasized the need for careful decision-making regarding further rate adjustments.
Christopher Waller, another hawkish Fed governor, shares this perspective. He stated this week that US economic data doesn’t indicate an immediate need for monetary tightening, but it is too early to determine if the recent moderation in inflation is a trend or a temporary deviation.
“I want to be cautious in claiming that we have successfully managed inflation until we see a few more months of data moving in the same direction,” Waller said in an interview with CNBC on Tuesday.
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