Three Federal Reserve officials on Friday signaled support for continuing to raise interest rates, most likely at the central bank's next meeting in December, after having held them steady this week.
"Skipping a meeting does not change the monetary policy destination," said Dallas Fed President Lorie Logan, in remarks delivered to college students Friday that were released by the bank.
Logan voted in favor of the decision to hold steady this week. The last time the Fed held rates steady, in July, Logan dissented in favor of a rate increase. The Fed raised rates in September. Two of the 12 voting members of the Federal Open Market Committee dissented this week in favor of a rate increase.
Logan repeated her view that the Fed needs to make at least two more increases of a quarter point. She said moving gradually made sense after recent market swings and because the timing of any increase matters less if investors understand where the Fed is ultimately headed.
After making two additional rate increases, she said, "it would make sense in my view to pause and examine economic and financial developments to determine what further action may be appropriate."
St. Louis Fed President Alberto Musalem, who isn't a voter on policy this year, said he judged "additional firming of monetary policy will be necessary, and soon." Without further increases, he said inflation would likely stay well above the Fed's 2% target over the next 18 months.
During remarks in New York, Musalem spelled out what it would take to convince him to hold off. Inflation could ease without more Fed rate increases if energy prices and shipping costs fall. Demand could also slow more than expected if spending on the AI build-out drops sharply or if a sudden pullback in financial markets leads wealthier households to retrench. Musalem said he saw this scenario as "less likely but plausible."
Both officials signaled little concern about recent turbulence in financial markets. Logan said the run-up in long-term interest rates this year mostly reflects investors' expectations of stronger growth, a sign that "monetary policy has work to do."
Richmond Fed President Tom Barkin told Sirius XM Business Radio a "gradual approach" to raising rates made sense because the Fed is "not much behind the curve."
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