Fed's Logan calls for 'modestly higher' interest rates

Dallas Federal Reserve President Lorie Logan on Thursday became the first of Fed Chairman Kevin Warsh's new colleagues to call publicly for an interest-rate hike, laying the groundwork for a possible dissent at the central bank's next rate-setting meeting in just under two weeks.

"Inflation has been too high, for too long, and does not appear to be on track all the way back to 2%," Logan said in remarks prepared for delivery in Houston. "I currently believe modestly higher interest rates would better balance the outlook and risks for the FOMC’s maximum employment and price stability goals."

Logan's concerns are emblematic of a growing minority at the Fed who feel that keeping short-term borrowing costs on hold is the wrong policy recipe when inflation risks, as Logan characterized them on Thursday, are to the upside and the labor market remains solid.

Warsh became central bank chief in May, and at his first meeting in June, despite a few who saw the case for a rate hike, all his fellow policymakers supported the decision to keep the policy rate in its current 3.50%-3.75% range.