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Fed’s Logan: Models show that Fed funds could be ‘very close’ to neutral

  • Fed will ‘most likely’ need more cuts but should ‘proceed cautiously’
  • If Fed cuts too far past neutral, inflation could re-acclerate
  • Difficult to know how many Fed rate cuts may be needed, and how soon they need to happen
  • Fed has made a great deal of progress in bringing inflation down
  • Fed not quite back to price stability yet
  • US economic activity is resilient
  • Labor market cooling gradually but not weakening materially
  • Sees upside risk to inflation, downside risk to employment, says financial conditions may pose biggest challenges for monetary policy
  • If bond yields continue to rise, the Fed may need less-restrictive policy

Logan last spoke in late October and wasn’t quite this hawkish. I think the Fed cuts in December but takes a pause after that and waits to see how things play out.

This article was written by Adam Button at www.forexlive.com.

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