Dallas Fed's Logan estimates at least two more 25-bp rate hikes are needed

Achieving the Federal Reserve's mandate of price stability and maximum employment may require an additional 50 basis points of rate, or more, to balance the outlook and risks for the central bank's dual mandate, Dallas Fed President Lorie Logan said Thursday.

"In combination, a balanced labor market and inflation trending above target mean the stance of policy has been offsides," Logan said in prepared text for opening remarks at an event at the Dallas Fed. "In my view, the FOMC should set interest rates so we are on track to achieve both of our dual mandate goals, not just one."

Financial market activity reflects expectations for higher rates, she said. "Shifts in market risk-free rates reveal what market participants think the Fed will need to do; they don’t do our work for us," Logan said. "But higher term premiums can slow the economy, reducing the need to tighten monetary policy."

She said she'll continue to watch market developments to assess their implications.

From another perspective, strong economic growth and consumer spending are showing that monetary policy isn't restrictive. The end goal should be to make policy modestly restrictive, she said.

"Without any policy restriction, inflation will likely continue its above-target trend. Policy, therefore, needs to become restrictive," Logan said. "At minimum, a few additional increases in the target range would undo the FOMC’s risk management cuts from last fall."

Still, she'll continue to watch the labor markets, prices, growth, consumption, and financial conditions to evaluate whether policy is becoming restrictive.

Her comments contrast with those of Fed Vice Chair for Supervision Michelle Bowman, Fed Governor Philip Jefferson, and New York Fed President John Williams, who are in no rush for further rate adjustment.