Cooling labor market could be evidence its time to cut rates

Federal Reserve (Fed) Bank of Dallas President Lorie Logan hit newswires late on Thursday, noting that inflation progress has been significant, the US labor market remains far too firm to push the Fed into rate cuts any time soon. Fed policymaker Logan went on to admit that even if inflation hits 2%, it may not be enough independently to squeeze a rate trim out of the Fed.

Key highlights

Potential inflation increase would be a sign for further monetary policy action.

Cooling labor market or demand could be evidence it’s time to cut rates.

Choices in 2025 between resuming rate cuts or holding rates steady for a prolonged period.

Fed should guide rate path to maintain anchored inflation expectations.

There is uncertainty due to trade policy and volatile financial conditions.

Trade policy changes could significantly affect economy.

2% inflation does not imply rate cuts.

Strong labor market as a sign of nearing neutrality.

With inflation near 2% and labor market holding steady, Fed may not cut rates soon.

Real neutral estimates in US vary widely, but most have increased since the pandemic.

Logan emphasizes overall financial conditions when setting monetary policy.