Dallas Fed President Logan calls for ‘modestly’ higher interest rates

Dallas Federal Reserve President Lorie Logan, asserting that this week’s good inflation news wasn’t good enough, called Thursday for “modestly” higher interest rates to win a battle the central bank has been losing for the past five years.

A voting member this year on the rate-setting Federal Open Market Committee, Logan insisted that inflation is still a major problem for U.S. households that demands action from policymakers. While other Fed officials have expressed a preference for higher rates if inflation metrics don’t improve, Logan’s is the most specific call for a hike.

“I currently believe modestly higher interest rates would better balance the outlook and risks for the FOMC’s dual mandate goals,” Logan said in prepared remarks for a speech in Houston. “Every month of above-target inflation has compounded the strain on Americans’ budgets.”

Earlier in the week, the Bureau of Labor Statistics reported some progress on that front: Consumer prices for June dropped 0.4%, the biggest monthly decline since April 2020, while wholesale prices slipped 0.3%. Both gauges benefited from slumping oil prices, though costs in several other key categories, most notably housing, also softened.

Still, Logan said there’s more work to do for the Fed to meet its 2% inflation goal. Despite the monthly decline, consumer prices rose 3.5% from a year ago, while wholesale costs increased 5.5%. Inflation has been above the central bank’s target since early 2021.

“One month of relief is not enough. It is time to finish the job of restoring price stability,” she said. “In monetary policy as in hockey, you have to skate where the puck is going. Unfortunately, inflation does not appear to be headed sustainably back all the way to 2 percent.”

Markets already expect the FOMC to raise its key overnight borrowing rate by a quarter percentage point later this year — possibly as soon as September, but more likely October, according to the CME Group’s FedWatch tracker of fed funds futures pricing.