Dallas Federal Reserve President Lorie Logan said Thursday that the economic data points so far don’t justify skipping a rate increase at the central bank’s next meeting in June.
While noting some progress in bringing down inflation and cooling the labor market, Logan said the Fed still has work to do in achieving its goal for price stability. Logan is a voting member this year of the rate-setting Federal Open Market Committee.
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“After raising the target range for the federal funds rate at each of the last 10 FOMC meetings, we have made some progress,” she said in prepared remarks for a speech to bankers in San Antonio. “The data in coming weeks could yet show that it is appropriate to skip a meeting. As of today, though, we aren’t there yet.”
Market pricing indicates an expectation that the Fed will hold the line at its June 13-14 meeting, pausing a rate-hiking cycle at began in March 22. The CME Group’s FedWatch gauge, which gauges prices in the fed funds futures market, puts a 26% probability for a 0.25 percentage point hike at the meeting, though the odds have been rising in recent days.
Like other Fed officials who have spoken recently, Logan emphasized that the decision ultimately will be based on inflation and employment data still to come before the next meeting.
In other remarks Thursday, Fed Governor Philip Jefferson also said inflation is too high, but he’s watching to see the impact that the rate hikes will have on the economy before deciding on future moves.
“History shows that monetary policy works with long and variable lags, and that a year is not a long enough period for demand to feel the full effect of higher interest rates,” Jefferson said in prepared remarks for a speech in Washington, D.C.
But Logan expressed concern that what she’s seen so far has indicated only modest impact from the Fed rate hikes, which have totaled 5 percentage points.
“We haven’t yet made the progress we need to make. And it’s a long way from here to 2% inflation,” Logan said, referring to the Fed’s longer-run goal.
She noted that the Fed’s preferred inflation data point, the core personal consumption expenditures price index, ran at a 4.9% annualized pace in the first quarter. That was higher than the 4.4% pace in the fourth quarter of 2022.