Fed's Logan Calls for At Least Two More Rate Hikes as Musalem, Barkin Also Back Tightening

Three US Federal Reserve policymakers argued on Friday that the central bank should keep raising interest rates to bring down inflation, just two days after the Fed left borrowing costs unchanged, Reuters reported. Dallas Fed President Lorie Logan, St. Louis Fed President Alberto Musalem and Richmond Fed President Thomas Barkin all pointed to further tightening as the Fed’s post-meeting blackout period ended.

Logan calls for at least two more hikes

Logan, who holds a vote on the Federal Open Market Committee (FOMC) this year, said in prepared remarks for an event at Davidson College that, given the current outlook, the committee needs at least two more quarter-point rate increases. After that, she said, it would make sense to pause and assess economic and financial developments, according to Reuters.

She described inflation running above the Fed’s 2% goal as unacceptable. 24/7 Wall St reported that Logan cited core PCE inflation of 3.1% in the 12 months through September and said the Fed has missed its target for nearly six years. The outlet also quoted her as saying that skipping a hike in October “does not change the monetary policy destination.”

Musalem and Barkin back further tightening

Musalem, who is not a voter on the FOMC in 2026, told a Shadow Open Market Committee event that additional firming of policy will be needed soon. He said monetary policy and financial conditions remain accommodative and that inflation is unlikely to ease without action from the Fed, adding that smaller moves made earlier tend to be less disruptive than larger, abrupt ones later.

Barkin, speaking on SiriusXM’s Business Briefing, said inflation is high, demand is solid and unemployment relatively low, making the direction of policy clear. He added that the open question is the pace, noting the Fed had signalled a gradual approach.

Fed held rates on Wednesday

The FOMC on Wednesday kept the federal funds target range at 3.75% to 4%, following a rate increase in September, Reuters said. 24/7 Wall St reported the decision was taken by a 10-2 vote, with Cleveland Fed President Beth Hammack and Governor Lisa Cook dissenting in favour of a hike. Fed Chair Kevin Warsh told reporters he was encouraged by recent progress on inflation but acknowledged that price stability has not yet been achieved.

According to 24/7 Wall St, September PCE inflation stood at 3.6% year on year, while real GDP grew at a 3.4% annual rate in the third quarter. The outlet said CME FedWatch put the odds of a quarter-point hike in December at about 76%, and that the two-year Treasury yield slipped to 4.56% from 4.61% as the speeches were released.

Reuters reported that the Nasdaq fell to its weakest level in three months on Friday amid concerns over artificial intelligence, and that futures markets had pared bets on a December hike, though traders still see one as more likely than a hold.

What’s next

The Fed’s next policy meeting is scheduled for December 8-9. Warsh did not indicate what the committee would decide then, according to Reuters. US midterm elections take place on Tuesday, November 3.

#businessnews