President and CEO of the Dallas Fed, Lorie Logan, emphasizes the need to maintain stable bank interest rates to effectively control inflation.
She also stated that if inflation and the labor market weaken significantly, cutting interest rates is necessary. Her view is that monetary policy needs to remain tight for a while longer to bring inflation back to target.
MAIN CONTENT
Monetary policy needs to keep interest rates high longer to control inflation.
Logan warns not to overly rely on short-term positive inflation news.
Cutting interest rates will be necessary if inflation and the labor market weaken considerably.
Why does Lorie Logan propose keeping the current bank interest rates?
According to Lorie Logan, to fully control inflation, it is necessary to maintain the current bank interest rates, and monetary policy must remain tight for a while longer to ensure inflation returns to target levels. This is based on analyses of economic data and the labor market conducted by the Dallas Fed.
She emphasizes that a somewhat restrictive policy can still maintain high employment rates, avoiding negative impacts on the labor market.
When does Logan believe that reducing interest rates becomes urgent?
Logan warns that if there is a scenario of both reducing inflation and weakening the labor market, the central bank may need to lower interest rates faster than expected. Over her three years as CEO of the Dallas Fed, she has always been cautious about inflation and believes that complex economic developments such as U.S. tariffs can change the timing of interest rate cuts.
In June, 19 forecasters predicted there would be two rate cuts this year, while 9 predicted one or no cuts. This divergence reflects uncertainty about the impact of tariff policy on inflation.
Monetary policy must remain tight for a while to truly bring inflation down to target levels without harming the long-term labor market.
Lorie Logan, CEO of the Dallas Fed, July 2025
What does Logan warn about positive temporary inflation news?
Logan believes that one should not place too much trust in short-term positive inflation news because they once created hope but later inflation increased again. She asserts that it is necessary to observe the phenomenon of low inflation persisting before one can trust economic stability.
This reflects caution and experience in evaluating complex economic data while avoiding compromising the independence of the central bank under political pressure.
Excessive rate cuts could drive prices up, undermining the benefits of a strong labor market.
Lorie Logan, CEO of the Dallas Fed, speaks at an event in July 2025
Logan's views on central bank independence under political pressure
In the context of significant criticism and calls to lower interest rates from the U.S. President, Logan emphasizes the importance of independence in the central bank's monetary policy decisions. She notes that these decisions must be made carefully to maintain long-term economic stability.
Calvin Jenkins, an independent economist, also stated that respecting and protecting the independence of the central bank helps establish credibility with financial markets and investors.
How does economic data support the Dallas Fed's view?
On July 15, consumer price data showed that the core price increase last month was lower than expected, marking the fifth consecutive month of this positive trend. However, companies can still pass some of the tariff impacts onto customers, which is why the Fed remains cautious.
This information encourages some experts to be more optimistic about the economic improvement in 2025 despite many challenges still existing.
Frequently Asked Questions
1. Why does the Dallas Fed suggest keeping interest rates high for longer?
Keeping interest rates high effectively controls inflation without severely impacting the labor market, according to CEO Lorie Logan and reports from the Dallas Fed.
2. What are the benefits of not cutting interest rates early?
Maintaining interest rates helps avoid the risk of inflation rising again, ensuring long-term economic stability and maintaining high employment levels.
3. When could the Fed lower interest rates according to forecasts?
If inflation and the labor market weaken significantly, the central bank may adjust policy to lower interest rates to boost growth.
4. How to accurately assess short-term inflation fluctuations?
It is necessary to observe prolonged trends and various economic indicators to avoid being misled by unsustainable short-term positive news.
5. Why is the Fed's independence important?
Independence helps the Fed make objective policy decisions, avoiding influence from political pressures, ensuring long-term economic stability.
Source: https://tintucbitcoin.com/dallas-fed-logan-lai-suat-phai-cao/
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