The Federal Reserve needs to implement at least two more 25-basis-point rate increases given the current economic outlook after the Fed voted to hold interest rates steady this week, according to Dallas Fed President Lorie Logan.
Without any monetary-policy restraint, inflation will continue to trend above target unless unexpected shocks occur, Logan said at an event Friday in Davidson, N.C.
There had been speculation that Logan would dissent at October's FOMC meeting, given her previous calls for tighter monetary policy and a previous dissent she gave in July. On Friday, she offered more explanation to why she instead supported the committee's decision to hold interest rates where they are.
Financial markets have been volatile in response to news on the technology-investment outlook and geopolitical developments, she said. In such an environment, adjusting policy more gradually can help households, businesses and market participants adapt to higher rates and reduce the risk that economic activity deteriorates more sharply than necessary, she added.
Moreover, Logan said the precise timing of each rate increase has little effect on the longer-term rates most borrowers pay as long as market participants understand the Federal Open Market Committee's policy plans.
In addition, skipping a meeting of rate increases doesn't change the monetary-policy destination, Logan argued.
"By making the destination clear, the FOMC can better help the economy adapt and obtain the promised benefits of a skip," she explained.
Given the current outlook, the end goal should be to make policy modestly restrictive to sustainably deliver both maximum employment and stable prices, Logan said
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