Fed officials stress inflation still too high

Dallas Federal Reserve President Lorie Logan used remarks in Houston on July 16 to emphasize that inflation remains a central concern for monetary policymakers. She said inflation has been "too high, for too long" and does not appear to be on track to return fully to the Federal Reserve’s 2% target. In her view, the current outlook suggests that modestly higher interest rates would better balance economic risks.

Logan argued that recent data have not yet provided sufficient reassurance on the inflation path. Referring to the latest monthly figures, she said that "one month of relief is not enough" following the June inflation report. She framed the task facing the central bank as unfinished, stating that it is time to "finish the job of restoring price stability."

Logan’s comments came after June inflation readings showed some moderation. Headline consumer prices rose 3.5% year-on-year in June, compared with a higher increase in May, while producer prices declined 0.3% month-on-month. Despite this softer data, Logan indicated that she is not yet convinced inflation is firmly returning to target.

As a voting member of the Federal Open Market Committee, Logan will participate in the next policy decision scheduled for July 28-29. Her view that modestly higher interest rates may be appropriate signals a continued willingness among some policymakers to tighten policy further if needed. She also noted that the labor market appears solid, suggesting that employment conditions do not currently pose a barrier to potential further rate increases.

Logan pointed to several factors that could keep inflation pressures elevated. She highlighted renewed hostilities in the Middle East as a source of upside risk, implying potential impacts on supply and prices. In addition, she cited strong investment demand related to artificial intelligence as another factor that could support higher inflation.

These risks, in Logan’s assessment, complicate the outlook for a smooth return of inflation to the 2% target. By underscoring both geopolitical and technological drivers of demand and costs, she framed the inflation challenge as stemming from multiple fronts rather than a single temporary shock.

On the same day, Kansas City Fed President Jeff Schmid delivered a similarly cautious message on inflation. Speaking at an economic forum, he described his "primary concern" as inflation, which he said is "too hot" and has been above target for too long. He emphasized that inflation remains the central consideration guiding his approach to setting policy.

Together, the comments from Logan and Schmid highlight a shared focus within the Federal Reserve on ensuring that inflation moves decisively back toward the 2% goal. While incoming data have shown some easing, both officials signaled that they view the progress as insufficient so far, keeping the prospect of further policy tightening on the table.