(Bloomberg) — Federal Reserve Bank of Dallas President Lorie Logan said the US central bank is in a good position with interest rates to be patient as policymakers watch incoming data on inflation.
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The latest reports on prices were welcome news, but several months of good data will be needed to instill confidence that inflation is headed back to the Fed’s 2% target, Logan said Tuesday at an event in Austin.
“From a monetary policy perspective, we’re in a good position, we’re in a flexible position to watch the data and be patient,” Logan said during a moderated question-and-answer session. “We’re going to need to see several months of that data to really have confidence in our outlook that we’re headed to 2%.”
Fed officials left their benchmark interest rate unchanged last week but reduced their outlook for the number of rate cuts this year to one, from the three estimated in March, according to their median projection. Data out last week showed increases in consumer prices excluding food and energy decelerated for a second straight month in May following a surprise acceleration in the first quarter of the year.
The Dallas Fed chief said she was still worried about upside risks to inflation despite signs the economy is coming into better balance. She also said the neutral setting for rates may be higher than it was before the pandemic.
“We’ve just been surprised by how well the economy has just performed at these higher levels of rates, so I think that’s driven questions” about the neutral rate, Logan said. “My sense is that that level is probably higher than it was in the decade before the pandemic because a lot of structural features have changed in our economy.”
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