Dallas Federal Reserve President Lorie Logan said Thursday that inflation remains “much too high” and is not cooling quickly enough to justify pausing interest rate increases at the central bank’s June meeting.
“After raising the target range for the federal funds rate at each of the last 10 FOMC meetings, we have made some progress,” she said in remarks prepared for delivery to the Texas Bankers Association in San Antonio “The data in coming weeks could yet show that it is appropriate to skip a meeting. As of today, though, we aren’t there yet.”
Logan, a voting member of this year’s policy-setting Federal Open Market Committee, emphasized the decision will ultimately hinge on inflation and employment data released shortly before the June 13-14 meeting.
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But she expressed disappointment that inflation has not declined faster, given the aggressive series of rate hikes over the past year.
Although inflation has eased from a peak of 9.1%, it remains about more than double the pre-pandemic average and well above the Fed’s 2% target rate. On top of that, the labor market remains uncomfortably tight, with unemployment recently falling to 3.4% – the lowest rate since 1969.
“We haven’t yet made the progress we need to make,” Logan said. “And it’s a long way from here to 2% inflation.”
Investors have been betting that the Fed would take a break in raising rates at its meeting next month after policymakers approved a 10th increase in May, lifting the federal funds rate to a range of 5% to 5.25%, the highest since 2007.
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“A decision on a pause was not made today,” Fed Chair Jerome Powell told reporters after the meeting, though he noted the “meaningful” change in the official statement. “We’re no longer saying that we ‘anticipate.’ We’ll be driven by incoming data, meeting to meeting. We’ll approach that question at the June meeting.”
But the hawkish comments from Logan, as well as Cleveland Fed President Loretta Mester, have raised the specter of an 11th rate hike in June.
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The probability that the Fed hikes its rates in June by a quarter-percentage point jumped to 36.7% on Thursday afternoon – up from 10.7% the previous week, according to data from the CME Group’s FedWatch tool, which tracks trading.
“This week’s Fedspeak chorus is on point to remind markets that the Fed’s mandate is to restore price stability, and it’s prepared to raise rates again to get the job done if inflation doesn’t cooperate,” said Quincy Krosby, chief global strategist for LPL Financial.