Opening remarks for moderated conversation at Voices of the Eleventh District
SPEECH DIGEST
HAWKISH high confidence · 3.9k characters readLogan uses her recap of the September FOMC meeting to argue the committee is behind: policy is "offsides" and needs to become "modestly restrictive." She puts a number on it, saying the target range should rise "an additional 50 basis points or more" after the September 25 basis point hike, and wants at minimum to undo last fall's risk management cuts. The one caveat is term premiums, which she concedes can do some of the tightening for the committee. Read: hawkish, with a specific marker above one-and-done pricing.
What’s new: The September 25bp hike and Logan's general hawkish tilt are already priced. What is new is the explicit size and shape of her ask: "an additional 50 basis points or more," plus the framing that the stance is "offsides" and that the floor is undoing last fall's cuts. Her term-premium caveat is the only part that cuts the other way, and it is conditional and model-dependent.
KEY FINDINGS
- Logan estimates the target range needs to rise 'an additional 50 basis points or more' beyond the September hike. Puts her well beyond a single 25bp follow-up and pulls front-end pricing toward a longer hiking cycle.
- She says the stance of policy 'has been offsides' and the end goal is 'to make policy modestly restrictive,' with a minimum of undoing last fall's 'risk management cuts.' Frames September as a first step rather than a peak, pressuring short-dated yields higher.
- On term premiums, she says higher premiums 'can slow the economy, reducing the need to tighten monetary policy,' and that she will watch model decompositions. The only two-sided risk in the speech: it gives the committee room to do less if long-end yields keep rising.
- She describes inflation as trending toward the mid-2s, growth as strengthening, and the labor market as well balanced at 4.1 percent unemployment. Underpins the case against cuts in the near term.
- The document flags these as her views 'and not necessarily those of my FOMC colleagues'; it gives no vote count and no dissents. Single-voter signal, so it caps how much committee intent can be read out of it.
FROM THE DOCUMENT
In combination, a balanced labor market and inflation trending above target mean the stance of policy has been offsides.
Still, I currently estimate the target range needs to rise an additional 50 basis points or more to appropriately balance the outlook and risks for our dual mandate goals.
Doing so will require tighter monetary policy.
But higher term premiums can slow the economy, reducing the need to tighten monetary policy.
I’m delighted to welcome all of you to the Dallas Fed this evening. The perspectives you share with us are invaluable. You help our researchers understand the nuances of the economy, beyond what we can glean from official statistics. And you help me understand where the economy is headed and how monetary policy can make a difference. I’d like to start by sharing my own perspective on the economy, coming out of the Federal Open Market Committee (FOMC) meeting two weeks ago. These are my views and not necessarily those of my FOMC colleagues. Over the summer and early fall, incoming information has confirmed key elements of the economic outlook I’ve had for some time. Inflation is falling as transitory factors fade. But it is trending toward the mid-2’s, not all the way to the FOMC’s 2 percent goal. A half-decade of above-target inflation has badly strained Americans’ budgets. We must restore price stability. Meanwhile, economic growth is strengthening. And the labor market remains well balanced. At 4.1 percent, the unemployment rate is close to most estimates of the lowest sustainable level. Congress gave the FOMC a dual mandate in monetary policy. We are charged with delivering both