Senior Fed policymakers signalled rates may already be near neutral, favouring patience as inflation remains elevated and labour markets stay resilient.
Summary:
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Fed officials signal patience on rates
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Policy seen near neutral levels
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Inflation still the primary concern
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Labour market holding up so far
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No rush for further cuts
Two senior Federal Reserve policymakers on Tuesday reinforced a message of patience, signalling that U.S. interest rates may already be close to an appropriate level and that there is little urgency to adjust policy further while inflation remains above target.
Speaking in Texas, Dallas Federal Reserve President Lorie Logan said current policy settings may already be near a neutral rate, one that neither restrains nor stimulates economic activity. She argued that, relative to inflation, interest rates appear to be providing limited additional restraint, suggesting policymakers may already be close to where they need to be.
While acknowledging risks to both sides of the Fed’s dual mandate, Logan indicated she is more concerned about inflation, which she described as still stubbornly high. She said upcoming data will be crucial in determining whether inflation continues to ease and whether the labour market remains stable. If both conditions are met, she suggested the current policy stance would likely remain appropriate, with no further rate cuts required. However, a combination of easing inflation and a more material cooling in labour-market conditions could justify lower rates.
In separate remarks in Ohio, Cleveland Federal Reserve President Beth Hammack took a similarly cautious tone, saying she believes monetary policy is well positioned to remain on hold as officials assess incoming data. She acknowledged inflation is expected to ease this year but stressed it remains too high and has persisted above the Fed’s 2% target for several years.
Hammack said she wants clearer evidence of sustained inflation progress before considering further adjustments. Rather than fine-tuning rates, she favours patience while monitoring the impact of recent policy easing and broader economic performance. Based on her outlook, she said rates could remain unchanged for an extended period.
Both officials are voting members of the Federal Open Market Committee this year, underscoring a growing consensus within the Federal Reserve around holding rates steady amid lingering inflation risks.
Hammack
