Fed's Logan calls for two more rate hikes as inflation holds above 2% target
Federal Reserve officials are lining up behind more interest-rate increases, with Dallas Fed president Lorie Logan saying the FOMC needs "at least two more 25-basis-point rate increases" given the current outlook. Her remarks at Davidson College on Friday, echoed by Richmond Fed president Tom Barkin and the St Louis Fed's Alberto Musalem, came two days after the central bank held its benchmark rate steady.
Logan, who votes on rate decisions this year, argued that moving gradually gives households, businesses and markets time to adapt to higher rates and lowers the risk that activity deteriorates more sharply than necessary. "Skipping a meeting does not change the monetary policy destination," she said. Barkin, speaking on SiriusXM radio, called a gradual approach "a good way to go", while Musalem said in New York that incremental adjustments made earlier are usually less disruptive than larger, abrupt actions taken later.
The push for further tightening rests on inflation that has stayed above the Fed's 2% target for more than five years. The Fed's preferred measure accelerated to 3.6% in September as oil prices rose again, and a separate report showed the economy grew in the third quarter at its fastest pace in a year, helped by consumer spending and business investment tied to the artificial intelligence boom. "If we do see a continued surge in demand, that would be the kind of thing you might want to lean against," Barkin said.
Wednesday's decision to hold was not unanimous: Fed governor Lisa Cook and Cleveland Fed president Beth Hammack dissented in favour of a second consecutive increase this month. Fed chairman Kevin Warsh declined to give his own outlook but said elevated inflation remains the central bank's main focus, describing financial conditions as tighter since September's hike while saying he is "unwilling and unable to call them tight".
Most officials projected an additional hike this year in forecasts published after the September meeting, when the FOMC raised rates for the first time since 2023. Futures contracts point to that move at the Fed's final meeting of the year on 8-9 December, with a likely pause in January and a possible third hike in March. Logan said that after her two projected increases the Fed should pause to assess developments and decide whether more are needed, with the aim of making policy "modestly restrictive" so it can sustainably deliver both maximum employment and stable prices.
