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Dallas Fed's Logan Backs Higher Interest Rates as Inflation Too Hot to Ignore

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Dallas Fed's Logan Backs Higher Interest Rates as Inflation Too Hot to Ignore

Dallas Fed President Lorie Logan on Thursday pushed for "modestly higher" interest rates as she, along with her Kansas City counterpart, downplayed soft inflation data this week and flagged persistent price pressures.

Logan, who is a Federal Open Market Committee voter this year, doesn't see inflation on a path to hit the US central bank's 2% goal.

"Inflation has been too high, for too long, and does not appear to be on track all the way back to 2%. And the inflation risks are to the upside," Logan said in a remarks prepared for an event in Houston. "I currently believe modestly higher interest rates would better balance the outlook and risks for the FOMC's maximum employment and price stability goals."

Data showed this week that consumer and producer prices decreased in June on a monthly basis as energy prices retreated.

But Logan said one-month of relief is not enough. "It is time to finish the job of restoring price stability," she added.

Kansas City Fed President Jeffrey Schmid echoed similar sentiment, saying its too early to "put too much weight" on this week's soft inflation data.

The inflation problem isn't limited to energy as the services industry has been trending "well above" the level consistent with the Fed's 2% target, Schmid said in prepared remarks for a speech in Nebraska. He doesn't vote on monetary policy this year.

"The persistence of inflation across a broad-based selection of goods and services is concerning, especially with inflation running above the Fed's 2% objective for five consecutive years," Schmid said. "My focus remains on inflation in setting the correct course for policy."

On Wednesday, Fed Governor Lisa Cook said inflation is more likely to accelerate than cool given price pressures arising from an artificial intelligence boom and major supply shocks.

Last month, all FOMC members voted to keep interest rates steady, marking the Fed's fourth consecutive pause. However, Fed officials held diverging views on the appropriate path of interest rates, according to minutes from the central bank's June meeting released earlier this month.

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