Dallas Fed’s Logan urges more rate hikes

Dallas Federal Reserve President Lorie Logan said the central bank’s policy rate needs to rise an additional 50 basis points or more to move monetary policy into a modestly restrictive stance and support the restoration of price stability. She framed this level of tightening as necessary to ensure inflation is brought back toward target.

Logan described current policy as not yet restrictive, even after the most recent rate increase. She said achieving a modestly restrictive stance would require more action beyond the latest adjustment.

Logan noted that last month’s quarter-point increase, which lifted the federal funds rate target range to 3.75%–4.00%, was an important first step. However, she emphasized that this move alone does not make policy sufficiently tight.

She characterized the economy as strengthening and the labor market as well balanced. In her view, the combination of firm economic activity and a solid labor market justifies maintaining a focus on tightening policy enough to restore price stability.

Logan stated that she will continue to monitor labor markets, prices, growth, consumption and broader financial conditions to judge whether monetary policy is becoming restrictive. This ongoing assessment will inform her view on the appropriate path for interest rates.

Logan pointed to recent moves in the Treasury market, noting that the 10-year Treasury yield had touched a roughly 24-year high and was around 5.24% on the day she spoke. She observed that such a level represents a significant tightening in long-term borrowing costs.

She said part of the rise in long-term yields may reflect higher term premiums, which are the extra returns investors demand for holding longer-dated securities. In her assessment, higher term premiums could slow the economy.

Because higher long-term yields can weigh on growth, Logan said this development might reduce the amount of additional policy tightening needed from the Federal Reserve. The interaction between market-driven financial conditions and policy rates is therefore an important consideration in her outlook.

Logan noted that a few additional rate increases would effectively reverse the Federal Open Market Committee’s risk-management cuts of about 75 basis points implemented late last year. Those earlier reductions had been framed as precautionary steps.

By outlining how many additional moves might unwind those risk-management cuts, Logan linked prospective rate hikes to a normalization away from previous easing measures. This underscores her view that, given current economic conditions, policy should move into a clearly restrictive zone rather than remain in a more accommodative posture.