US FEDERAL Reserve Bank of Dallas president Lorie Logan urged policymakers to remain cautious in the coming months, reiterating lower inflation would not necessarily prompt further interest-rate reductions.
“Even if we do get better data – and it does look like it’s coming close to 2 per cent – I think we should be cautious,” Logan said on Friday (Feb 14) during a moderated discussion in Palm Desert, California. “Because if the labour market and the overall economy is strong, even in that environment, it does not necessarily mean there’s room to cut rates further.”
The Dallas Fed chief’s comments echoed those she made last week. Logan previously said interest rates may already be near neutral – a stance of policy that neither stimulates nor restrains economic activity – countering the near-term need for further cuts even if inflation abates.
“There’s a real question about how restrictive monetary policy is right now, and so I think we need to be cautious,” she said on Friday.
Logan said officials are in a good position to monitor incoming data. If policymakers see more data similar to that of the end of 2024, which showed a solid labour market and easing inflation, she said the central bank will be in a position to say they are closing in on a so-called soft landing.
Logan said her focus remains on price stability and hitting the central bank’s 2 per cent inflation goal.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Policymakers held interest rates unchanged at their Jan 28 to 29 meeting after cutting them by a full percentage point over the last three meetings of 2024. Several Fed officials have said they want to wait until inflation ebbs and for further clarity on President Donald Trump’s economic plans before lowering borrowing costs.
Trump’s policies – which span from tariffs to tax cuts to immigration – add more uncertainty to the economic outlook, and economists say they have the potential to stoke inflation.
Data out earlier this week showed the consumer price index rose 0.5 per cent in January from a month earlier, the biggest advance since 2023. The so-called core measure, which Fed officials closely track as it excludes often-volatile food and energy costs, also climbed by more than forecast.
“I think the next couple of months are pretty important for us to be watching the data,” Logan said. “It could mean that there’s this interaction between the beginning of the year and the business cycle such that businesses take the opportunity to adjust prices when the economy is strong.” BLOOMBERG
