Lorie Logan, president of the Federal Reserve’s 11th District, asserted support for slower interest rate increases during her first major policy speech, delivered at The University of Texas McCombs School of Business’ Rowling Hall on Wednesday.
“My own view is that we will likely need to continue gradually raising the fed funds rate until we see convincing evidence that inflation is on track to return to our 2% target in a sustainable and timely way,” said Logan, who started in the Federal Reserve Bank of Dallas’ top job last August.
She said slower rate hikes coupled with a commitment to not setting a peak interest rate provide a “flexible and robust” answer to inflation in today’s complex financial environment.
“In my view, we shouldn’t lock in on a peak interest rate or precise path,” she added. “Instead, I believe it’s appropriate to gradually raise rates, carefully assess financial conditions and the outlook, and remain flexible to adjust as needed so we can robustly manage the risks we face.”
The Federal Open Market Committee slowed its interest rate hike campaign Dec. 14 with a half-percentage-point increase, to a range of 4.25%-4.5%, after a three-quarter-point increase Nov. 2, and Logan said conditions suggest the need to slow it further at its next meeting Jan. 31-Feb. 1.
She said evidence of improvement comes from inflation statistics and changes in factors that have caused the problem, including supply and demand challenges and a tight labor market.
“Even after we have enough evidence to pause rate increases, we’ll need to remain flexible and raise rates further if changes in the economic outlook or financial conditions call for it,” Logan said.
Julia Coronado, McCombs clinical associate professor of finance and Logan’s former colleague at the Fed, moderated a question-and-answer period after the speech. She said Logan’s two decades of experience with the Fed are points of confidence in her policy objectives.
McCombs Dean Lillian Mills welcomed Logan, a Kentucky native, to campus and to Austin. “We are proud to be the intellectual front porch, where business school meets business practice, and where our community can convene with top business leaders to tackle real-world problems,” she said.