The Fed’s Stalemate With Prices
Dallas Federal Reserve President Lorie Logan said the recent dip in consumer prices wasn’t a win—it was just a pause in a longer climb. Inflation remains too high, she said, and the Federal Reserve needs to act now to push it down to 2%, the central bank’s target. That means modestly higher interest rates, she told a crowd in Houston Thursday.
Logan, a voting member of the Federal Open Market Committee this year, offered the clearest public call so far among Fed officials for a rate increase. Other members have hinted at the need for further hikes, but few have tied them to precise language or timing. Logan didn’t specify when she wanted action, but she said waiting too long could force the Fed into more forceful moves down the line.
June’s Deflation, and What It Doesn’t Fix
Last week’s Bureau of Labor Statistics numbers showed the biggest drop in consumer prices in two years—down 0.4% in June. Energy prices helped, especially oil, and housing costs softened. Still, the year-over-year gain stands at 3.5%, and core prices excluding energy remain stubbornly elevated. For now, the Fed’s target is a world away.
Markets Watch for July, Expect October
Logan said she doesn’t expect inflation to return to 2% without help. “If higher inflation becomes entrenched, we’d need sharper rate increases to bring it back to target,” she said. Traders see a 12.3% chance the Fed will raise its benchmark rate at its July 28–29 meeting. More likely, a hike comes in October, according to the CME FedWatch tool. But Logan stressed that waiting too long could force the Fed into sharper, more painful moves.
Logan’s remarks offered little surprise about the magnitude of any rate change. She emphasized the need to stay focused, not on how much to raise rates, but on the risk of inaction. “Better modest restriction now than severe restriction later,” she said.