Fed’s Logan advocates gradual rate cuts

In a speech today, Dallas Fed President Lorie Logan emphasized the need for a “more gradual path” in reducing the fed funds rate following last month’s 50bps cut. She stated that this approach would better balance the dual mandate of controlling inflation while maintaining healthy employment levels.

“Inflation and the labor market are in striking distance of our goals rather than seriously overheated,” Logan noted, explaining “less-restrictive policy” would help avoid overcooling the job market while bringing inflation sustainably back to target.

Logan also expressed concerns over uncertainties surrounding inflation, consumer spending, and economic activity, which remain robust despite ongoing monetary tightening. “I continue to see a meaningful risk that inflation could get stuck above our 2% goal,” she said.

“These risks suggest the FOMC should not rush to reduce the fed funds target to a ‘normal’ or ‘neutral’ level but rather should proceed gradually while monitoring the behavior of financial conditions, consumption, wages and prices,” Logan said.