Recapping Dallas Fed’s Logan – Rate path in 2025 depends on economic conditions

Dallas Federal Reserve President Lorie Logan spoke earleir:

• Fed’s Logan: Says 2025 choice is to resume cutting soon, or to hold ‘for quite some time’
• More from Fed’s Logan – estimates of neutral rate vary widely, but most have moved up

Logan provided some ‘forward guidance, outlining two possible paths for U.S. monetary policy in 2025:

• suggesting that the Federal Open Market Committee (FOMC) could either resume rate cuts soon
• or maintain current levels for an extended period.

“In some scenarios, it will soon be appropriate to resume reducing the federal funds rate target range,” Logan said. “In other scenarios, we’ll need to hold rates at least at the current level for some time.”

She also highlighted reasons why the Fed might opt to keep rates steady, even if inflation approaches the central bank’s 2% target.

“What if inflation comes in close to 2% in coming months? While that would be good news, it wouldn’t necessarily allow the FOMC to cut rates soon, in my view,” she noted.

Logan argued that if economic growth remains solid and inflation remains controlled, it would be difficult to justify calling current monetary policy “meaningfully restrictive.”

“In choosing a path, we should be guided by the need to maintain well-anchored inflation expectations,” she emphasized.

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While we’d probably prefer more specific guidance, having scenarios laid out like this is more useful.

This article was written by Eamonn Sheridan at www.forexlive.com.