Dallas Fed's Logan says rates should rise as inflation stays above 2% target

Federal Reserve officials are signaling that the fight against inflation may not be finished, with Dallas Fed President Lorie Logan warning that "modestly higher" interest rates may be needed if price pressures do not continue to ease toward the central bank’s 2% goal. Logan said acting sooner could reduce the risk that inflation becomes entrenched and forces more aggressive tightening later. Her comments add to a broader debate inside the Fed over how long borrowing costs may need to stay elevated, even as inflation has come down from its peak. The discussion comes as the Fed’s July 10 Monetary Policy Report to Congress said inflation is still being pushed up by factors including tariffs, higher energy prices tied to geopolitical disputes and increased investment in artificial intelligence, while a strong labor market does not rule out further rate increases. Consumer inflation expectations also remain firm: the New York Fed’s June Survey of Consumer Expectations showed one-year expectations at 3.6%, the highest since September 2023, three-year expectations at 3.3%, and five-year expectations unchanged at 3.0%. Vice Chair Philip N. Jefferson said on July 16 that policy is "well positioned" but cautioned against overreacting to a single favorable inflation report, adding that officials would be prepared to raise rates if inflation changes course. Chair Kevin Warsh has stressed that restoring price stability remains the central bank’s priority without signaling whether more hikes are likely. Even so, futures markets still point to expectations for gradual rate cuts later on, leaving investors exposed if Fed officials continue to sound more hawkish than expected. Higher-for-longer U.S. rates can strengthen the dollar, tighten global financial conditions and weigh on risk assets including technology stocks and cryptocurrencies.