Fed's Logan calls for '50 bps or more' in rate hikes
TLT•Dallas Fed President Lorie Logan said rates need to rise at least another 50 basis points to make policy modestly restrictive and return inflation to the Fed's 2% goal. The Fed raised its policy rate by a quarter point last month, to a range of 3.75%-4.00%.
1. Logan backs more hikes
Logan said the Fed needs to raise short-term borrowing costs by at least another half percentage point to make monetary policy modestly restrictive and get inflation back on track toward its 2% goal. She called last month's quarter-point rate increase, which brought the target range to 3.75%-4.00%, an important first step.
2. Inflation and the economy
Logan said inflation is falling as transitory factors fade, but may not fall much below 2.5% without further rate hikes. She described the economy as strengthening and the labor market as well balanced, and said a few more increases would undo the Fed's 75 basis points of rate cuts over the final three meetings of last year.
3. Bond yields and policy
The 10-year Treasury yield touched a 24-year high before falling to around 5.24%. Logan said higher long-term yields indicate markets expect strong economic growth and a higher Fed policy rate, though they may also reflect higher term premiums that can slow the economy and reduce the need for further tightening. She said the rate needed to make policy restrictive is uncertain and depends on broader financial conditions.
