Inbizzy, Washington – Dallas Federal Reserve President Lorie Logan said the United States may need additional slack in the labor market to ensure inflation falls to the 2% target. Her remarks come as inflation shows signs of easing but remains above the Federal Reserve’s long-term goal.
Inflation Still Above Target
Logan explained that core inflation is holding at around 2.4%. While lower than the 2022 peak, the figure remains inconsistent with the Fed’s 2% objective. She emphasized that underlying price pressures remain strong, requiring further policy measures to restore price stability.
Monetary Policy Seen as Only “Modestly Restrictive”
According to Logan, the current stance of monetary policy is only “modestly restrictive,” suggesting that interest rates are not yet tight enough to fully contain inflation. She also cautioned that cutting rates too quickly could make policy excessively loose and risk reigniting price pressures.
Role of the Labor Market
The still-tight US labor market is seen as a factor restraining progress on inflation. Logan noted that more slack—whether through higher unemployment or reduced working hours—may be necessary to ease wage pressures and consumer demand. This adjustment, she said, is critical to bring inflation down in a sustained way.
Interest Rate Decisions Ahead
Logan stressed that all monetary policy decisions should be based on incoming economic data. The Fed, she added, must be certain that inflation is firmly on track to reach 2% before making significant changes to interest rates.
Price Stability as a Priority
While acknowledging that added slack in the labor market could have consequences for households, Logan emphasized that price stability remains the central priority. Stable prices, she said, are essential to ensuring the long-term health and sustainability of the US economy.
