Fed’s Logan Hints at Gradual Rate Cuts

Federal Reserve Bank of Dallas President Lorie Logan suggested on Monday that the Fed may gradually lower interest rates in the future, provided the economy continues to perform as expected. She also indicated that the Fed plans to continue reducing its balance sheet.

Logan highlighted the following key points:

Economic Stability: The economy is currently strong and stable.

Potential Rate Cuts: If economic forecasts materialize, the Fed may gradually decrease interest rates.

Balance Sheet Reduction: The Fed will continue to reduce its balance sheet, a process that’s part of normalizing monetary policy.

Liquidity: Despite some volatility in money markets, liquidity remains abundant.

Reverse Repo Facility: The Fed aims to minimize balances in its reverse repo facility over time.

Mortgage Bond Sales: Selling mortgage bonds from the Fed’s portfolio is not a current priority.

Logan emphasized the importance of the Fed remaining flexible in its monetary policy decisions to address potential economic challenges, such as inflation risks and job market uncertainties.