Fed’s Logan: Neutral rate may be higher post-pandemic, inflation risks persist

In a moderated Q&A session overnight, Dallas Fed President Lorie Logan stated, “From a monetary policy perspective, we’re in a good position, we’re in a flexible position to watch the data and be patient.” She highlighted the need for “several months” of favorable data to gain confidence that inflation is on track to the 2% target.

Despite signs that the economy is balancing better, Logan expressed concerns about persistent upside risks to inflation. She also suggested that the neutral rate setting may now be higher than pre-pandemic levels.

“We’ve just been surprised by how well the economy has performed at these higher levels of rates,” she noted. Logan attributed this to structural changes in the economy, implying that the neutral rate might be higher than it was in the decade before the pandemic.