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Dallas Federal Reserve President Lorie Logan said Friday that it is unclear whether monetary policy is tight enough to reduce inflation to the U.S. central bank's 2% target, and how price pressures still remain. are too strong, it is too early to cut interest rates.
There are still good reasons to think inflation will return to 2% in the coming years, Logan said at the Louisiana Bankers Association's annual conference. "I also have significant upside risks to inflation on my mind, and I think there are also uncertainties about how tight policy is and whether it's tight enough to keep us on this path."
Last week, the US central bank kept its policy rate in the 5.25%-5.50% range, with Fed Chair Jerome Powell noting that the lack of progress on Inflation so far this year means rates will likely have to stay where they are for longer than previously thought. .
"As I think about appropriate policy, I think it's too early to think about cutting rates," Logan said Friday.
The job market and the broader economy remain strong, he said, an unusual combination in light of the rapid decline in inflation last year.
"But it's not a 'soft landing' until we've landed, and we haven't yet," Logan said, referring to a scenario in which inflation falls without triggering a painful recession or major job losses. He added that the inflation data, particularly in the first quarter, "was a little disappointing for us and is a good reminder of the work we still have to do."
The Federal Reserve's gauge for its 2% inflation target (the year-over-year change in the price index of personal consumption expenditures) fell from a high of 7.1% in mid-2022 to 2.5% in January 2024, and more recently, in March, it rose. at 2.7%.
Meanwhile, unemployment in the United States has remained low by historical standards, and 3.9% in April is only a few tenths of a percentage point higher than when the Federal Reserve began its rate-hiking campaign in March 2022.
In March, most Fed policymakers still thought the central bank would likely cut rates two or three times this year to prevent policy from tightening too much and unduly hurting the labor market. On Friday, Logan did not express an opinion on the possible timing of the rate cuts.
"I think I need some of these uncertainties to be resolved about the path we're on, and we need to remain very flexible with policies and continue to look at the data that's coming in and look at how financial conditions are evolving and make sure that the judgments that we make we are doing are appropriate.โ
Source: Reuters (Reporting by Ann Saphir; Editing by Paul Simao)
