Friday, September 29, 2023

Logan warns that the Fed “has work to do” even if it maintains interest rates in September

Sept 8 (Reuters) – Federal Reserve Bank of Dallas President Lorie Logan said on Thursday that while it might be “appropriate” to forego a rate hike at the U.S. central bank’s next meeting, this is likely to be the case will be. Further tightening of monetary policy will be necessary to reduce inflation to 2% in a timely manner.

“Forecasts are inherently uncertain. My basic belief, however, is that there is still much work to be done,” he said in prepared remarks to the Dallas Business Club at Southern Methodist University. “After the unacceptably rapid price increases of the last few years, I am still not convinced that we have eradicated excessive inflation.”

The Federal Reserve has raised its official interest rate by a total of 5.25 percentage points since March 2022 to combat inflation, which reached 7% at its peak last year as measured by the Fed’s preferred measure, the Personal Consumption Expenditures Price Index ( PCE).

Since then, inflation has slowed to 3.3% in July, and the Federal Reserve has also reduced the pace of its rate hikes, even skipping a rate hike at its June meeting before making its final quarter-point rate hike in July, making this the Target set The official interest rate is between 5.25% and 5.5%.

“It may be appropriate to forego another rate hike when we meet later this month,” Logan said, referring to the Fed’s next meeting on September 19-20. “But skipping doesn’t mean quitting.”

Lower inflation is “encouraging” but not necessarily low enough, he said, especially with labor markets still strong. Unemployment is at 3.8% and there are still 1.5 jobs for every job seeker.

Additionally, stronger economic growth – retail sales and consumer spending were strong in July and housing construction rebounded after a slowdown earlier in the year – could also put upward pressure on prices.

“I think we should proceed gradually and weigh the risk of inflation being too high and the risk of the economy slowing too much,” he said. “In the coming months, a reassessment of the data and outlook may confirm that we need to do more to contain inflation.”

Nation World News Desk
Nation World News Desk
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