Logan Becomes First Fed Official to Back Rate Hike Under Warsh

Dallas Fed President Lorie Logan on Thursday became the first Federal Reserve official to publicly call for higher rates since Kevin Warsh took over as chair. In prepared remarks in Houston, Logan said "modestly higher interest rates would better balance the outlook and risks" because inflation remains well above the 2% target despite June's softer CPI print. Inflation "has been too high, for too long," she said, and "does not appear to be on track all the way back to 2%."

Logan argued that policy is not tight enough. "The labor, consumption and financial data indicate that monetary policy is not restraining the economy," she said. She warned that waiting would raise the eventual cost of restoring price stability. "Better modest restriction now than severe restriction later." The June CPI report gave her little comfort. A return to 2% under current conditions is "more a hope than a likelihood," Logan said.

She pointed to two forces that could keep prices elevated. Renewed fighting in the Middle East threatens to push energy costs higher. The AI investment boom is already lifting demand across the economy. AI could eventually improve productivity, Logan said, but "the potential size and timing of those gains are uncertain," while "the demand effects are here already."

Her remarks set up a sharper debate at the July 28-29 FOMC meeting. Other officials have signaled patience or a preference to hold. None had publicly argued for a hike until Thursday. The divide means the committee's statement and dot-plot will get close scrutiny even if the rate decision itself is unanimous. Warsh has not tipped his hand on whether the data supports Logan's view or the pause camp. The next CPI release, due Aug. 13, will supply fresh ammunition for both sides.