Dallas Fed Pres. Lorrie Logan:
- Despite the uncertainty, financial market volatility, the US economy is resilient.
- Labor market stable.
- Inflation still somewhat above target.
- Risks are balanced on both sides of the mandate.
- If tariffs change inflation expectations and that would be significant.
- Market volatility, uncertainty could cause households, businesses to pull back.
- Monetary policy well-positioned to wait, be patient.
- Well-positioned to act if risk materialized.
- Key risk is if higher short-term inflation expectations become entrenched.
- Our job is to ensure inflation doesn’t become persistent.
- Risk from tariffs is higher unemployment and higher inflation putting two Fed goals in conflict
Logan’s bias appears cautiously neutral (risks both sides) with a fear toward inflation risks rising.
She emphasizes patience in current policy, reflecting confidence in the economy’s resilience. However, her concern about inflation expectations becoming entrenched—especially due to tariffs—signals vigilance and a willingness to act IF inflation risks intensify. It is a big IF, but she is not in any hurry.
Earlier today, Fed Governor Christopher Waller was a bit more dovish. He said rate cuts remain possible later this year if inflation continues to ease and tariffs stay modest. He expects tariffs to cause a one-time price rise—not persistent inflation—and believes the Fed can look through that impact. Still, uncertainty around trade policy poses risks, with tariffs likely to be the main inflation driver in 2025 and potentially increasing unemployment, especially in the second half of the year.
Waller sees the Fed as close to its inflation target and stresses that policy should focus on real economic activity when inflation is near goal. He doubts a 10% tariff would push inflation to 3% and downplays concerns from consumer surveys, noting workers lack the leverage to demand higher wages in the current job market.
He also attributed rising long-term yields to fiscal concerns and foreign buyer anxiety but said there’s no issue with bond market functioning. Overall, Waller remains attentive to inflation forecasts and sees no signs of the pandemic-era inflation dynamics returning.
This article was written by Greg Michalowski at www.forexlive.com.