Dallas Fed President Advocates Gradual Rate Cuts

Dallas Fed President Lorie Logan expressed confidence in a strategy of gradual interest rate cuts as the economy remains 'strong and stable' but faces meaningful uncertainties, particularly regarding the labor market and inflation risks. In her recent speech, she emphasized the need for the Federal Reserve to be adaptable in policy decisions and highlighted the ongoing balance sheet reduction, which has decreased from $9 trillion to $7.1 trillion. Logan underscored that while inflation has retreated, the labor market's strength may influence the pace of rate cuts, suggesting two more reductions might be feasible by year-end if conditions allow. The Fed is balancing these monetary policy adjustments with the goal of achieving maximum employment and stable prices. Logan's remarks indicate a cautious yet proactive approach as market participants analyze mixed signals from employment and inflation data to forecast potential rate changes. Ongoing discussions highlight the importance of maintaining robust liquidity in the market amid these shifts in monetary policy.