Central bank official calls for a measured approach to further interest rate reductions
Federal Reserve Bank of Dallas president Lorie Logan urged caution on more interest rate cuts, pointing to stubborn inflation and a still-strong job market.
Speaking to graduate students at the University of Texas at Austin, Logan said the central bank’s recent rate cut was “insurance against more rapid, non-linear decline in the labor market,” but emphasized that “we need to be very cautious about rate cuts from here and make sure that we appropriately calibrate policy so that you don’t ease conditions too much and only to have to reverse course, which would be very painful in terms of restoring price stability.”
Logan’s remarks come as the Federal Reserve faces mounting pressure from market participants and some policymakers to accelerate monetary easing.
The central bank announced its first rate cut of the year in September, and decisionmakers including Stephen Miran have made the case for more reductions in the months ahead.
Inflation remains above target
However, she pointed to inflation running above the Fed’s 2% target and warned that “the combination of persistent inflation, resilient demand and modest labor market slack indicates to me that policy is likely only modestly restrictive.”
She added, “There may be relatively little room to make additional rate cuts.”
The Dallas Fed chief said she was not convinced inflation was on track to return to the 2% goal, pointing to evidence that factors beyond tariffs—such as non-housing services inflation—were keeping the overall gauge elevated by as much as 30 or 40 basis points.
“There’s evidence tariffs are not the only factor driving price acceleration,” Logan said. Her remarks echoed growing concerns among Fed officials about the uptick in services inflation.
Labor market showing gradual cooling
While acknowledging that payroll gains have “declined markedly,” Logan said the labor market is “fairly balanced” and “only gradually slowing.”
She noted that supply-side factors, such as reduced immigration, were at play. “The drop in immigration likely means the breakeven rate for monthly payrolls increases — where new hiring matches population growth — is around 30,000,” she said. “The gradual increase in labor market slack to date is what I expected and what is necessary to bring inflation down.”
She described the economy as “very close to maximum employment,” but cautioned that it would be “appropriate to see a little more cooling in the labor market.”
Logan also highlighted the impact of tariffs, noting that while their effect on inflation has been “more moderate than had anticipated,” ongoing uncertainty could elevate inflation expectations.
“Even if tariffs have one-time effect, the longer it takes and uncertainty continues, the higher the risk to inflation expectations,” she said.
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