Dallas Federal Reserve President Lorie Logan has expressed support for raising interest rates, stating that inflation does not appear to be declining toward the Fed's 2% target in a sustainable manner.
In prepared remarks for an event in Houston on Thursday, Logan indicated that, at present, she believes a moderate increase in the policy rate would better balance the prospects and risks associated with the Fed's dual mandate of price stability and maximum employment.
She further added that if inflation does not return to 2% on its own, some degree of policy restraint will be necessary to help achieve that goal.
A growing number of Federal Reserve officials have voiced concerns about persistent high inflation and warned that the central bank may need to raise interest rates soon. The latest economic projections released in June showed that half of the 18 policymakers anticipate at least one 25-basis-point rate hike this year, with a few officials believing a case for an increase was already present last month.
Despite these views, Fed officials have so far held interest rates steady, and investors are betting they will maintain this stance at their next meeting scheduled for July 28-29.
Recent data released this week showed a monthly decline in consumer prices for June, driven by falling gasoline costs, following a significant surge in energy prices in recent months linked to the outbreak of war between the United States and Iran.
Logan emphasized that a single month of relief is insufficient, stating that now is the time to complete the task of restoring price stability.
Logan holds a voting role on the rate-setting Federal Open Market Committee this year. She also acknowledged the possibility of a more optimistic inflation outlook, citing the June inflation figures. She noted that if housing and non-housing services prices continue to slow, overall price increases could decelerate further.
However, she cautioned that this path is fraught with uncertainty. It relies on avoiding further price pressures from energy shocks in the near term and from strengthening demand in the medium term. For now, she described this scenario as more of a hope than a likelihood.
Logan also addressed the rise of artificial intelligence (AI), which is driving strong investment demand for computer chips and other inputs and has sparked discussion among Fed officials about its potential inflationary impact.
She stated that AI and other new technologies could ultimately lead to significant productivity gains, enabling the economy to supply more goods and services. However, the potential scale and timing of these benefits remain uncertain. The demand-side effects are already visible, and when demand outpaces supply, the result is upward pressure on prices.
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