U.S. inflation has been hotter-than-expected in the first half of the year and the Federal Reserve needs to push interest rates higher to cool it down, Dallas Federal Reserve President Lorie Logan said Thursday.
“The continuing outlook for above-target inflation and stronger-than-expected labor market calls for more-restrictive monetary policy,” Logan said, in remarks to the annual meeting of the Central Bank Research Association in New York.
“I remain very concerned about whether inflation will return to target in a sustainable and timely way,” she said.
In June, the Fed held its benchmark interest rate steady in a range of 5%-5.25%. At the same time, the Fed released an updated the dot-plot forecast that showed Fed officials have penciled in two more rate hikes this year.
In her remarks, Logan said it was important for Fed officials “to follow through on the signal we sent in June.”
The Dallas Fed president, who is a voting member of the Fed’s interest rate committee this year, said she thought a rate hike in June would have been “entirely appropriate” but decided that moving gradually made sense in the challenging and uncertain environment.
In her remarks, Logan said she was skeptical with the argument from Fed doves that the economy is going to slow soon because of lagged consequences of the rapid pace of the Fed’s rate hikes over the past year and a half.
Logan noted that the housing market looks like it may have bottomed out. This could pose an upside risk to inflation down the road, she said.
Traders in derivative markets think that a 25-basis point hike in July is a virtual certainty.
Stocks
DJIA,
SPX,
were lower in early trading on Thursday on strong jobs data from ADP. The yield on the 10-year Treasury note
TMUBMUSD10Y,
rose above 4%.
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