The head of the Dallas Federal Reserve said the economy is “strong and stable.” However, as the U.S. central bank slowly lowers interest rates, it needs to keep an eye on inflation to make sure it doesn’t rise again.
Logan gave a speech in New York where she said, “Two things stand out to me from the current economic and financial picture.” “First, the economy is stable and strong. Second, there are still big unknowns in the future.
Logan said that the job market has gotten worse since the spring and that there are “still upside risks to inflation.”
So, she said the Fed should be very careful as it lowers the high interest rates that were put in place from 2022 to 2023 to stop inflation from getting too high.
If the road ahead is clear or cloudy, the right policy approach will change, Logan said.
Logan is one of the BourseWatch 50, which lists the 50 most powerful people in the world of money and finance. When it comes to monetary policy, she is seen as a bit more “hawkish” than some of her coworkers.
Logan talked at the Securities Industry and Financial Markets Association for a long time and mostly talked about how the Federal Reserve plans to reduce its huge, multitrillion-dollar balance sheet. She made it clear that getting rid of its stock of mortgage-backed securities will probably take longer.
During the pandemic, the Federal Reserve bought huge amounts of these securities to lower borrowing rates and boost the economy. Millions of homeowners refinanced their loans at very low rates.
The Federal Reserve is now working to lower the number of mortgages it holds, and in the end, it may hold none at all. This will allow the housing market to return to normal. It would only have Treasury bonds and notes on its bank sheet in that case.
The Fed has not been able to meet its target on reducing its mortgage holdings, however, because high interest rates have restrained the number of homeowners refinancing their loans.
Logan said current projections suggest mortgage-back securities could still reflect 15% of the Fed’s total balance sheet through the end of the decade.
