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An influential figure at the Federal Reserve has urged the central bank to immediately resume raising interest rates, reversing the decision to hold off last month. The official argued that there is little evidence of inflationary pressures easing and emphasized the need for further tightening of the US economy.
Lorie Logan, president of the Dallas Fed and a voting member of the Federal Open Market Committee, revealed her support for a quarter-point interest rate hike at the June meeting, citing strong incoming data. However, the committee unanimously agreed to pause the historic monetary tightening campaign, suggesting that additional increases would be necessary to manage demand effectively.
In a speech at a Central Bank Research Association event, Logan stressed the importance of the Federal Reserve “following through” and expressed concerns about the sustainability and timeliness of inflation returning to its target. She emphasized the significance of the recent data, describing it as “clearly indicative” of potential inflationary pressures.
Logan expressed doubts about the full impact of previous rate increases, suggesting that the effects have already had sufficient time to manifest. The federal funds rate has been raised by more than 5 percentage points since early 2022. She also highlighted potential risks to inflation related to signs of improvement in the housing market.
Logan also dismissed the notion that the banking stress experienced earlier this year has significantly impacted credit availability across the economy.
Chair Jay Powell and other officials have referred to these factors as reasons for a gradual approach to interest rate increases. However, Powell has recently acknowledged that consecutive rate hikes should not be ruled out. New York Fed President John Williams also commented that the decision to pause in June was appropriate, but more actions are needed regarding interest rates.
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