Dallas Fed President Logan says the latest data doesn’t justify suspending rate hikes just yet

Dallas Federal Reserve Chair Lorie Logan said Thursday that economic data so far does not justify not raising interest rates at the next central bank meeting in June.

While Logan noted some progress in bringing down inflation and cooling the labor market, he said the Fed still had work to do to meet its price stability goal. This year Logan is a voting member of the Federal Reserve Open Market Committee, which sets interest rates.

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“Having raised the target range for interest rates at each of the last 10 FOMC meetings, we’ve made some progress,” she said in prepared remarks for a speech to bankers in San Antonio. “Data for the coming weeks may yet show that it is appropriate to skip a session. To date, however, we have not yet reached our goal.”

Market prices suggest that the Fed is expected to keep its stance at its June 13th-14th meeting, breaking a cycle of rate hikes that started on March 22nd CME Group’s FedWatch indicatorThe Fed Funds Futures market, which tracks prices, thinks the chance of a 0.25 percentage point hike on the session is 26%, although the probability has been rising over the past few days.

Like other Fed officials who have spoken recently, Logan stressed that the decision would ultimately be based on inflation and employment data, which would be available before the next meeting.

In other comments Thursday, Fed Governor Philip Jefferson also said inflation was too high, but he was monitoring how interest rate hikes would affect the economy before deciding on future actions.

“History shows that monetary policy works with long and variable lags and that a year is not long enough for demand to feel the full impact of higher interest rates,” Jefferson said in prepared remarks for a speech in Washington, DC

However, Logan expressed concern that what she has seen so far indicates only a modest impact from the Fed’s rate hikes, which totaled 5 percentage points.

“We haven’t made the progress we need to make yet. And there’s still a long way to go from here to 2% inflation,” Logan said, referring to the Fed’s longer-term goal.

She pointed out that the Fed’s favorite inflation data point, the core consumer spending index, ran at an annual rate of 4.9% in the first quarter. That was higher than the 4.4% pace seen in the fourth quarter of 2022.