On Friday, Dallas Federal Reserve President Lorie Logan remarked that there are “uncertainties” regarding whether monetary policy is adequately restrictive to lower inflation to the Fed’s target, emphasizing that it is “premature” to consider interest rate cuts at this stage.
Key Takeaways
We’ve made substantial progress on inflation, with labor market and economy strong.
Not a soft landing yet.
Q1 inflation data disappointing.
There are important upside risks to inflation.
There are uncertainties if policy is sufficiently restrictive.
Too early to think about cutting rates.
We need to remain flexible on policy.
The neutral interest rate level may have risen.
Events of March 2023 have really impacted how we need to think about liquidity risk.
Critically important that banks have a broad set of funding arrangements; one of them has to be the Fed’s discount window.
We want to see every bank sign up for discount window.
We want to see every bank testing the discount window on a regular basis.
Safe, healthy banks use the discount window all the time; that’s a good thing.
Once banks are signed up, discount window is an easy system to use.
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