Lorie K. Logan, president of the Federal Reserve Bank of Dallas, said on May 1 that she supported the decision to keep the federal funds rate unchanged at this week’s Federal Open Market Committee (FOMC) meeting but dissented from language in the post-meeting statement suggesting a likely future rate cut.
Logan said her dissent was based on concerns about signaling a bias toward lowering rates when inflation remains above target. She highlighted that “the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks” in considering further adjustments to interest rates. According to Logan, this wording implies that another rate reduction is expected, which she disagrees with given current economic conditions.
“I am increasingly concerned about how long it will take inflation to return all the way to the FOMC’s 2 percent target,” Logan said. She noted that personal consumption expenditures price inflation has stayed above two percent for more than five years and pointed out persistent pressures from volatile commodity prices and potential supply disruptions due to conflict in the Middle East.
Logan also discussed labor market stability and uncertainty in economic forecasts. “Depending on which of these scenarios materialize, it could plausibly be appropriate for the FOMC’s next rate change to be either an increase or a cut,” she said.
She stressed that forward guidance is an important policy tool influencing financial conditions and planning by households and businesses. “When the FOMC gives forward guidance, it is important for that guidance to reflect the policy outlook. In light of the two-sided risks to monetary policy, I believed the FOMC should not give forward guidance implying a bias toward rate cuts at this time,” Logan concluded.
