US Fed's Logan calls for two more rate hikes, possibly rapidly

The US central bank needs to deliver at least two more quarter-percentage-point interest rate increases to bring down inflation, and may need to do so promptly to keep broadening price pressures from getting baked into the economy, Dallas Federal Reserve President Lorie Logan said on Tuesday.

"It remains clear to me, given the current outlook, that the FOMC (Federal Open Market Committee) needs to implement at least two more 25-basis-point rate increases," Logan said in remarks prepared for delivery to an energy conference sponsored by the Dallas and Kansas City Fed banks. "Excess inflation is unacceptable."

Consumer prices, even excluding volatile food and energy items, rose 0.3% in October, a pace that, if sustained, would translate to year-over-year inflation of more than 4%. The Fed has a 2% inflation target, as measured by the Personal Consumption Expenditures Price Index.

The Fed raised rates by a quarter of a percentage point in September but skipped a hike last month, a move that Logan supported because she felt that households, businesses and markets could adapt more easily to gradual rate hikes, which also reduce the risk of slowing economic activity more than necessary.

"The exact pace of increases could depend on the near-term economic and financial environment," Logan said. "It may be possible to move more rapidly this winter than the FOMC has moved so far this fall."

Inflation is rising not just because of wartime energy disruptions or tariffs, but also because of broader trends that could persist even after recent shocks dissipate, she said.

"Tighter policy will be necessary to appropriately balance the outlook and risks for inflation and employment," she said. "And it is important to achieve that balance promptly. The longer above-target inflation persists, the greater the risk that it becomes baked into behavior."

The Fed's next policy meeting is on December 8-9.
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