Last month the Federal Open Market Committee (FOMC) voted to put a hold on increasing interest rates after increase the rate 10 straight times. This was an effort to give policymakers proper time to evaluate the nation's economy, according to a report by Business Times.
“To have confidence that inflation will return to target on an appropriate timetable, we need to see more than some continued very modest rebalancing,” said Dallas Fed president Lorie Logan during a conference in New York.
According to the report by Business Times, Logan is a member of the Federal Reserve's rate setting committee, and she said that she backed extra monetary tightening. The FOMC announced its decision to suspend rate hikes along with a prediction that it will likely take two additional quarter point increases to its benchmark rate this year to bring inflation down to the long-term target of 2%.
According to minutes released by the Fed, several FOMC members initially favored an interest rate hike last month to control inflation, but then. pulled back to support the halt of the hikes anonymously. Logan said on June 6 that she was one of these members.
"In my view, it would have been entirely appropriate to raise the federal funds target range at the FOMC's June meeting, consistent with the data we had seen in recent months and the Fed's dual-mandate goals," Logan said.
"In a challenging and uncertain environment, it can make sense to skip a meeting and move more gradually," Logan further stated.
Logan justified her choice, saying that financial conditions were more important for the economy than the specific course of the policy rate. Data from the CME Group shows that futures traders predict that the Fed will impose the first of these raises as its upcoming meeting later this month with a likelihood of more than 90%.
"Financial conditions depend not only on how quickly rates rise but also on the level they reach, how long they remain there, and, crucially, the variables that determine whether rates rise or fall further," Logan said.
