Dallas Fed President Lorie Logan on Tuesday explained her support for the Federal Reserve's decision to hold interest rates steady, while maintaining her view that the central bank will still need to implement two additional rate hikes.
"Skipping a meeting does not change the monetary policy destination," Logan said. "Indeed, by making the destination clear, the FOMC can better help the economy adapt and obtain the promised benefits of a skip."
Logan, a voting member of the Federal Open Market Committee and president of the Federal Reserve Bank of Dallas, carries weight in FOMC deliberations as the committee weighs the trajectory of monetary policy during ongoing inflation concerns.
Her comments follow the FOMC's October meeting, where the committee kept the federal funds rate target range unchanged at 5.25 percent to 5.50 percent. The decision marked the second consecutive meeting without a rate increase, following a 25 basis point hike in July.
Logan acknowledged market volatility, noting that "financial markets have been volatile in response to news on the technology investment outlook and geopolitical developments." She argued that a gradual approach to policy adjustment can mitigate risks for businesses and households.
"In such an environment, adjusting policy more gradually can help households, businesses and market participants adapt to higher rates and reduce the risk that economic activity deteriorates more sharply than necessary," she said.
Logan also addressed the impact of timing on borrowing costs: "As long as market participants understand the FOMC's policy plans, the precise timing of each rate increase has little effect on the longer-term rates most borrowers pay." She suggested that the market's understanding of overall policy direction matters more than the exact timing of individual rate adjustments.
Equity markets declined Tuesday. The S&P 500 dropped 2.3 percent to close at 7,542, the Nasdaq fell 3.6 percent to 25,249, and the Dow Jones Industrial Average declined 1.4 percent to 51,634.
The next FOMC meeting is scheduled for December 12-13.
