Dallas Federal Reserve President Lorie Logan addressed a gathering of Texas business executives and community leaders on Thursday, emphasizing that the United States central bank will need to raise short‑term borrowing costs by at least an additional 50 basis points. She argued that this step is essential to move monetary policy from a “modestly restrictive” stance to one that can reliably bring inflation back to the Federal Reserve’s 2% target.

Why more hikes are needed

Logan noted that the Fed’s most recent quarter‑point increase, which placed the target range at 3.75%‑4.00%, was “an important first step” in tightening policy. However, she estimated that the range must rise another half‑percentage point—or more—to properly balance the outlook and risks associated with the Fed’s dual‑mandate goals of price stability and maximum employment.

Economic backdrop

According to Logan, the U.S. economy is strengthening and the labor market remains well‑balanced. While inflation is trending downward as transitory factors fade, she warned that without further rate hikes it is unlikely to fall much below 2.5%.

She also cautioned that a few additional increases would reverse the Federal Open Market Committee’s risk‑management cuts from last fall, which had lowered the policy rate by 75 basis points over three meetings.

Market signals

Logan’s remarks came on a day when the benchmark 10‑year Treasury note briefly touched a 24‑year high before settling around 5.24%. Higher long‑term yields, she said, reflect market expectations of strong economic growth and a higher Fed policy rate, though they may also incorporate higher term premiums that could slow the economy and reduce the need for further tightening.

Looking ahead

Logan stressed that the exact level of the policy rate needed to create meaningful restriction remains uncertain and will depend on evolving financial conditions. She pledged to continue monitoring labor markets, price trends, growth, consumer spending, and broader financial conditions to assess whether policy is becoming sufficiently restrictive.

“We must restore price stability,” Logan concluded, underscoring the Fed’s commitment to protecting the purchasing power of American families while preserving a robust labor market.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.