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The Fed Officials

The Fed Officials Send Signal Not to Hurry to Cut Interest Rates. Federal Reserve or The Fed officials warned that the United States (US) central bank may need to continue increasing its short-term policy interest rates.

This was stated by the President of the Federal Reserve (The Fed) Bank of Dallas Lorie Logan on Saturday (5/1) with the reason of maintaining the recent decline in long-term bond yields, so as not to trigger further inflation.

Logan also said that he should not rule out the possibility of another interest rate increase considering the easing financial conditions in recent months. As is known, the Fed will raise its benchmark interest rate aggressively in 2022 and early 2023 with the aim of reducing inflation which has reached a record high in 40 years.

However, since July 2023, the Fed has maintained interest rates in the range of 5.25%-5.5%. December 2023 policymakers signaled that they had seen enough progress in inflation, which could probably be achieved by raising interest rates and moving to lower interest rates in 2024.

Meanwhile, financial markets responded by betting big on a sharp drop in interest rates in 2024. However, Logan’s view marked a rejection of those bets.

Logan said that with most of the impact of the Fed’s past interest rate hikes behind us, a fall in the benchmark 10-year Treasury yield, from around 5% in mid-October 2023 to around 4% now, could open up a path for increased demand that could undo progress in tackling inflation.

He then also said that he could not rely on price stability if he did not maintain fairly tight financial conditions. Logan also signaled that he felt it was time to start thinking about slowing the process of shrinking the Fed’s balance sheet.

For the record, Logan’s statement is very important because he was one of the first Fed policy makers, in October 2023, to say that the increase in long-term bond yields helped some of the Fed’s efforts, so that it could maintain the policy interest rate at its level.

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