Fed’s Logan says ‘much too soon’ to think about cutting rates

Federal
Reserve
Bank
of
Dallas
President
Lorie
Logan
said
it’s
too
soon
to
consider

cutting
interest
rates,
citing
recent
high
inflation
readings
and
signs
that
borrowing
costs
may
not
be
holding
back
the
economy
as
much
as
previously
thought.

Logan,
whose
remarks
are
closely
watched
by
investors
given
her
prior
role
managing
the
central
bank’s
asset
portfolio
at
the
New
York
Fed,
said
she’s
increasingly
concerned
that
inflation
progress
could
stall
out. 

“In
light
of
these
risks,
I
believe
it’s
much
too
soon
to
think
about
cutting
interest
rates,”
the
Dallas
chief
said
Friday
in
prepared
remarks
for
an
event
at
Duke
University. “I
will
need
to
see
more
of
the
uncertainty
resolved
about
which
economic
path
we’re
on.”

Fed
officials “should
remain
prepared
to
respond
appropriately
if
inflation
stops
falling,”
she
added.

Fed
Governor
Michelle
Bowman
also
expressed
her
concern
about
potential
upside
risks
to
inflation
on
Friday.
She
continues
to
expect
price
pressures
will
cool
further
with
interest
rates
held
at
current
levels,
but
reiterated
that
it’s “still
not
yet”
time
to
lower
borrowing
costs. 

Logan’s
remarks
suggest
she
is
among
a
sizable
contingent
of
policymakers
who
expect
two
or
fewer
rate
cuts
in
2024.
She
spoke
hours
after
government
data
showed U.S.
payrolls
rose in
March
by
the
most
in
nearly
a
year
and
the
unemployment
rate
declined.

“There’s
no
urgency
right
now,”
Logan
said
in
a
question-and-answer
session
with
Duke
professor
and
former
Fed
board
senior
adviser
Ellen
Meade
following
her
speech. “We
have
time
to
wait
and
to
see
the
incoming
data
and
see
how
financial
conditions
are
evolving.”

Moving
Sideways

Fed
officials
left
interest
rates
unchanged
in
a
range
of
5.25%
to
5.5%,
a
more
than
two-decade
high,
at
their
March
meeting.
Most
policymakers
have
said
they
want
to
see
more
data
to
be
confident
that
inflation
is
sustainably
returning
to
their
2%
goal.

“To
be
clear,
the
key
risk
is
not
that
inflation
might
rise
—
though
monetary
policymakers
must
always
remain
on
guard
against
that
outcome
—
but
rather
that
inflation
will
stall
out
and
fail
to
follow
the
forecast
path
all
the
way
back
to
2%
in
a
timely
way,”
Logan
said.

Prices
rose
faster
than
hoped
in
January
and
February,
increasing
concern
among
some
officials
that
progress
on
inflation
is
petering
out.
While
the
median
of
19
policymakers
still
penciled
in
three
rate
cuts
for
this
year
in
economic
estimates
released
following
the
Fed’s
meeting
last
month,
nine
participants
saw
two
or
fewer
reductions.

Atlanta
Fed
President
Raphael
Bostic
said
Wednesday
he
expects
just one
rate
cut this
year
in
the
fourth
quarter,
and
Minneapolis
Fed
President
Neel
Kashkari
said
it may
not
be
necessary to
lower
borrowing
costs
if
inflation
stops
cooling
and
the
economy
remains
robust.

“If
we
continue
to
see
inflation
moving
sideways,
then
that
would
make
me
question
whether
we
needed
to
do
those
rate
cuts
at
all,”
Kashkari
said
Thursday.

Neutral
Rate

Beyond
the
inflation
data,
Logan
said
she’s
concerned
that
monetary
policy
may
not
be
holding
back
the
economy
as
much
as
most
forecasts
assume.
That
could
mean
the
so-called
neutral
rate
of
interest
—
one
that
neither
slows
nor
stimulates
the
economy
—
is
higher.

“Economic
and
financial
evidence
is
accumulating
that
the
long-run
neutral
rate
has
likely
moved
up,”
she
said.

Bowman
also
flagged
that
it’s “quite
possible”
the
neutral
rate
will
be
higher
than
before
the
pandemic.

“If
that
is
the
case,
fewer
rate
cuts
will
eventually
be
appropriate
to
return
our
monetary
policy
stance
to
a
neutral
level,”
Bowman
said. 

Uncertainties
in
measuring
things
like
the
neutral
rate
and
other
economic
developments,
including
a
surge
in
immigration
that’s
likely
contributing
the
country’s
output,
mean
it’s
more
useful
to
focus
on
inflation
data
right
now
than
jobs
figures,
Logan
added.

Payrolls swelled by
303,000
in
March,
topping
all
estimates,
government
data
showed
Friday.
The
unemployment
rate
edged
lower
to
3.8%,
wages
grew
at
a
solid
clip,
and
workforce
participation
rose,
underscoring
the
enduring
strength
of
the
labor
market. 

Balance
Sheet

Logan
also
repeated
that
it
may
be
appropriate
for
the
central
bank
to
soon
start
slowing
down
the
pace
at
which
it
lets
assets
mature
off
its
balance
sheet.
Policymakers
discussed
the
potential
slowdown
at
their
March
meeting
and
some
Fed
watchers
expect
that
process
to
begin
in
the
coming
months.

Logan
said
the
Fed
would
likely
lower
the
cap
for
how
much
in
Treasury
securities
it
rolls
off
the
balance
sheet
every
month,
while
leaving
the
cap
for
mortgage-backed
securities
unchanged. 

“I
don’t
think
we
should
really
move
the
mortgage
cap
because
keeping
it
there
sends
that
signal
that
we
are
headed
toward
a
primarily
Treasury
portfolio,”
Logan
said. “So
my
sense
is
that
what
we’re
talking
about
is
reducing
the
Treasury
cap
and
slowing
the
pace
of
the
Treasury
runoff.”