Upside risks to inflation mean Fed should not rush to reduce ratesI continue to see a meaningful risk inflation could get stuck above targetLowering policy rate gradually would allow time to judge how restrictive monetary policy may or may not beNormalizing policy gradually also allows Fed to ‘best balance’ labor market risksLess restrictive policy will help avoid cooling labor market more than necessaryProgress on inflation has been broad-based, labor market has cooled but remains healthyInflation, labor market ‘within striking distance’ of Fed goalsAs labor market has cooled, we case more risk it will cool beyond what is needed to get inflation to return to 2%Spending and economic growth that’s stronger than forecast poses upside risk to inflation
Logan is a hawk but she’s not pushing for any kind of a pause in rate cuts. The market is pricing in a 12% chance of no move in November but that looks high to me.
This article was written by Adam Button at www.forexlive.com.
