Fed Policy Divide: Logan Opposes Rate Reductions, Emphasizes the Importance of Curbing Inflation
- Dallas Fed President Lorie Logan opposes recent rate cuts, arguing economic conditions don't justify reductions despite the Fed's 3.75%-4.00% policy rate cut. - She highlights a "broadly in equilibrium" labor market and persistently high inflation above 2%, warning preemptive cuts risk undermining inflation control efforts. - Logan advocates patience for inflation progress, contrasting with Chair Powell's caution against labor market slowdowns, reflecting a broader Fed policy divide. - She supports endin
There is ongoing disagreement within the Federal Reserve regarding interest rate policy, as Dallas Fed President Lorie Logan maintains her resistance to recent rate reductions, insisting that the present economic landscape does not warrant further cuts. During remarks at a
This year, Logan does not have a vote on the Fed’s policy-setting committee, but she again expressed doubts about another rate reduction in December unless there is "clear proof that inflation will decline more quickly than anticipated or that the labor market will weaken more sharply," as reported in a
The Fed’s latest rate reduction, which set the policy rate between 3.75% and 4.00%, was defended by Chair Jerome Powell as a safeguard against further labor market weakening. Logan, on the other hand, objected to this strategy, warning that acting too soon with rate cuts could compromise the Fed’s efforts to rein in inflation. She also observed that consumer spending, while slightly above historical averages, is being driven by gains in the stock market and investments in artificial intelligence, whereas lower-income families and small businesses remain at risk, according to a
Beyond her views on rate policy, Logan also advocated for ending the Fed’s balance sheet reduction, noting that the central bank’s holdings are now "much nearer to a typical level." She indicated that if high money market rates persist, the Fed might need to restart asset purchases to ensure sufficient reserves in the banking system, as reported by Reuters.
Logan’s perspective highlights a wider split within the Fed’s policy committee, with two members voting against the recent rate cut. While some policymakers support more accommodative measures to bolster the labor market, others, including Logan, urge caution to avoid jeopardizing progress on inflation. With the December meeting approaching, her remarks reflect increasing doubt about the necessity for further easing, even as Powell remains open to making changes based on incoming data, as noted by MarketWatch.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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