``` No support for a rate cut this month? Fed officials reiterate inflation risks, say actions must be "especially cautious" ```

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An official who will have voting rights on the Federal Reserve's Monetary Policy Committee (FOMC) next year repeatedly emphasized the risk of inflation this week, with the latest remarks calling for cautious rate cuts.

On Thursday, October 2nd Eastern Time, Dallas Fed President Lorie Logan stated that the Federal Reserve must be "especially cautious" regarding further rate cuts, because inflation remains above the Fed's target level and is on the rise. Speaking at the Graduate School of Business at the University of Texas at Austin, she said:

"We must be particularly cautious about future rate cuts to ensure policy is adjusted appropriately, avoiding excessive easing that would ultimately require tightening again, which would make stabilizing prices extremely difficult."

Logan believes that U.S. inflation is currently "above our 2% target" and expects that tariffs imposed by the Trump administration will push inflation higher in the coming months.

Logan said last month's Fed rate cut decision provided appropriate insurance against a sharp deterioration in the labor market. Media noted that Logan hinted in her speech that she might not support another rate cut at the FOMC meeting at the end of this month. Logan stated that current monetary policy "does not appear to be excessively restrictive," and given that the Fed still needs to curb inflation, this policy stance is appropriate.

Logan’s comments reinforce expectations of internal disagreement within the Fed over the pace of rate cuts and may influence market pricing of further easing policies this year.

Achieving the Inflation Target May Require a Further Slowing of the Labor Market

Two days before her speech, Logan had just outlined her personal stance, mentioning that reaching the inflation target would require a bigger cost.

In a speech at a Dallas Fed event on Tuesday this week, Logan said the U.S. labor market may need to weaken further for the Fed to achieve the 2% inflation target. She said:

"To restore price stability completely, a further slowdown in the labor market may be necessary."

At that time, Logan pointed out that even without considering the impact of new import tariffs, the pace of price increases is still accelerating, and her team estimates that the speed of price increases outside of goods and housing is enough to keep inflation at a high level of 2.4%.

Logan then emphasized that U.S. domestic consumption remains "resilient," asset values are high, and sentiment seems to be rebounding, indicating that the current monetary policy pressure on the economy is "only moderately restrictive." She believes the Fed needs to maintain policy tightness sufficient to slow the economy, creating more labor "slack" through higher unemployment rates, reduced working hours, or other marginal factors in the labor market.

Room for Rate Cuts May Be Limited

Logan expressed concerns about the space for further rate cuts. She pointed out that the current policy rate of 4%-4.25% is already at the upper end of the neutral rate estimation range, and the neutral rate neither encourages nor restrains spending and investment.

"Without inadvertently shifting to an excessively loose stance, the room for further rate cuts may be relatively limited," Logan said.

She emphasized that she supported the recent 25 basis point rate cut to guard against a sharp rise in unemployment, but there is uncertainty over the extent to which policy can be further eased.

Logan reiterated: "I will remain cautious about further rate cuts. It is crucial for the FOMC to maintain its commitment to achieving 2% inflation." She said:

"My forecast is that the normalization process of monetary policy will slow down a bit to ensure we eventually achieve the 2% inflation target. So, this will take some time."

Logan's comments highlight the Fed officials' "broadly divergent views" on the pace of future rate cuts. Last month the Fed announced its first rate cut of the year, after which statements from Fed policymakers revealed huge differences over the pace of subsequent cuts.

The median rate forecast released by the Fed after last month’s meeting showed that most officials expect another 25 basis point cut this month and in December. The accompanying dot plot showed that out of 19 policymakers, 7 believe there should be no further rate cuts this year, only three fewer than those who believe at least a total of 50 basis points should be cut by year-end.

Logan's cautious stance may impact market expectations. She believes the labor market overall appears "quite balanced," and while she acknowledges employment risks, she places more emphasis on the prominence of inflation risk over the threat of rising unemployment.

Risk Warning and DisclaimerThe market has risks; investment must be cautious. This article does not constitute personal investment advice, nor does it take into account individual users’ specific investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investment based on this is at your own risk. ```