Dallas Fed President Says December Rate Cut Unlikely—Rates Should Remain on Hold for Some Time

(New York=Yonhap Infomax) Jin Woo Choi—Lorie Logan, President of the Federal Reserve Bank of Dallas, said on the 21st (local time) that "unless there is clear evidence that inflation is falling faster than expected or the labor market is cooling more rapidly, it will be difficult to cut rates again in December."

Speaking at an event hosted by the Kalbrunner Institute in Zurich, Switzerland, Logan referenced the two policy rate cuts implemented this year and made these remarks.

"I carefully consider the potential costs that measures to lower inflation may impose on the labor market," Logan said. "However, labor demand and supply have remained roughly balanced."

"Now that we have had two rate cuts, I am not confident there is further room for more," she added. "Monetary policy operates with a lag. It is too early to assess how restrictive the current policy stance is, given that two rate cuts have already been reflected."

She explained, "In the absence of clear evidence justifying further easing, keeping rates on hold for a time allows the FOMC to better assess the degree of policy restrictiveness."

Logan noted, "When the FOMC met in October, the downside risks had already been mitigated by the rate cut in September. The remaining risks to employment are ones the FOMC can closely monitor and respond to if they become more likely, but at present, they do not justify additional preemptive action."

"For these reasons, I did not see a need for a rate cut at the October meeting," she said. "While I supported the September rate cut, I would have preferred to hold rates steady at the October meeting."

On inflation, Logan emphasized, "It remains too high, putting pressure on corporate and household budgets, and is likely to exceed the FOMC's 2% target for too long. This economic outlook does not call for a rate cut."

"Inflation is not yet on a convincingly sustained path back to 2%," she said. "Even considering short-term factors, I remain concerned about the underlying inflation trajectory."

She added, "The FOMC has repeatedly reaffirmed its commitment to the 2% inflation target. Our obligation to the public is to achieve this goal. It is as important as pursuing maximum employment."

On the labor market, Logan assessed, "While nonfarm payroll growth has clearly slowed, slower job growth does not necessarily mean there is more slack in the labor market."

"Labor supply has declined alongside labor demand, particularly due to changes in immigration policy affecting labor force participation," she analyzed. "As a result, there has not been a rapid widening of the gap between job seekers and job openings."

However, Logan also noted, "Risks to the labor market are mainly to the downside. If layoffs, currently at low levels, were to rise sharply, the labor market may struggle to absorb them."

"Asset values can sometimes plunge almost without warning, which could weaken the momentum of consumer spending," she said, adding, "The resolution of the temporary federal government shutdown has removed a short-term downside risk."

jwchoi@yna.co.kr

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