Over the past few days, remarks by Federal Reserve officials have highlighted the ongoing debate over how much more the central bank needs to do to fight inflation.
On Thursday, Dallas Federal Reserve Bank President Laurie Logan said the data don’t yet support a pause but that she’s keeping an open mind.
“After raising the target range of the federal-funds rate at each of the last 10 [Federal Open Market Committee] meetings, we have made some progress. The data in coming weeks could yet show that it is appropriate to skip a meeting,” Logan said in remarks prepared for delivery to the Texas Bankers Association Thursday morning.
“I remain concerned about whether inflation is falling fast enough,” she added.
Speaking separately, Fed Gov. Philip Jefferson did not tip his hand beyond noting that there would be a lot of economic data to review before the Fed interest-rate committee’s next meeting June 13-14.
He noted that “the level of uncertainty is high.”
On the one hand, inflation remains “too high,” and by some measures, progress on bringing it down has been slowing, Jefferson said this morning in remarks to the National Association of Insurance Commissioners.
On the other hand, the U.S. economy has slowed considerably this year.
“History shows that monetary policy works with long and variable lags, and that a year is not a long enough period for demand to feel the full effect of higher interest rates,” Jefferson said.
Jefferson said his base case is that the U.S. economy can avoid a recession but that gross domestic product growth will “remain quite slow.” There are also downside risks from a pullback in bank lending.
In an interview with the Financial Times released later Tuesday, St. Louis Fed President James Bullard said he has an open mind about June rate decision but was leaning toward another hike.
Bullard said another hike would be “taking out some insurance” that the Fed really has inflation under control.
Stocks
DJIA,
SPX,
were mixed on Thursday with the Dow Jones Industrial Average down 166 points while the S&P 500 was up slightly. The yield on the 10-year Treasury note
TMUBMUSD10Y,
rose to 3.64% after Logan’s remarks were released.
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