Dallas Federal Reserve President Lorie Logan said Friday that the Federal Reserve will not achieve its 2% inflation objective unless policymakers take modest action in the near term. Logan cited a strong labor market and upward risks to price pressures as the core reasons for calling for additional restraint.
Logan was one of three Fed officials who dissented from the decision earlier this week to hold the benchmark federal funds rate in the 3.50% to 3.75% range. At the two-day policy meeting, she voted in favor of a quarter-percentage-point increase. The other two dissenting votes were cast by Cleveland Fed President Beth Hammack and Minneapolis Fed President Neel Kashkari, while nine policymakers supported keeping rates unchanged.
In explaining her position, Logan pointed to contemporary indicators she views as signaling that monetary policy is not currently exerting sufficient restraint. She referenced labor market strength, continued consumer activity and developments in financial markets as evidence that the economy remains on a path where inflation risks remain tilted to the upside.
Logan summarized her view in a written statement:
"Without any policy restraint, inflation will likely continue to trend above target until there’s an unanticipated shock ... modest action in the near term would reduce the likelihood of needing to take sharper action later,"
Her comment frames modest, prompt tightening as a strategy to lower the chance of having to implement more aggressive measures at a later date. The statement links the current composition of labor, consumption and financial conditions directly to the assessment that policy is not sufficiently restrictive.
Logan's vote and accompanying explanation add a clear voice to the subset of policymakers advocating for a small, precautionary step rather than maintaining the status quo. The positions taken at the meeting show a division within the Federal Open Market Committee about the timing and size of further tightening, even as a majority favored leaving the policy rate unchanged.
Summary takeaway: Logan sees a combination of a strong labor market, ongoing consumption and financial market dynamics as reasons to prefer a modest near-term rate increase to help ensure inflation returns to target and to avoid the prospect of more forceful action later.