Fed's Logan sees need for at least two more quarter-point rate hikes

As a known hawk who has voted for rate increases, Logan's remarks may not be as concerning as feared following Waller's comments earlier. The key points from her statement include:

• Inflation running too high is not acceptable
• At least two additional quarter-percentage-point rate increases are clearly needed, according to the Fed
• Raising interest rates more quickly this winter than the central bank has done so far may be feasible
• It is crucial to 'promptly' balance the outlook, along with risks for inflation and employment
• Gradual policy adjustments can help lower the risk of a sharper-than-necessary economic slowdown
• After two more rate rises, a pause to evaluate further moves would be reasonable
• The rise in bond-market rates shows monetary policy still has ground to cover, not an independent boost to activity
• The Fed's policy rate is at least 50 basis points below a level considered modestly restrictive
• Accommodative policy is fueling inflationary pressures; the real Fed funds rate stands at 78 basis points, according to data
• Energy disruptions from wartime are not the sole driver of price pressures
• Higher-than-expected consumer price index readings raise concerns that personal consumption expenditures inflation may rise
• Inflation is tracking well above the 2% target
• The labor market is in balance and even tightening slightly
• Economic growth is robust, with strong consumer spending and solid business investment
• Price pressures extend beyond tariffs, and the broad trend is likely to continue

The market is repricing Fed policy today, effectively adding another rate rise to the outlook over the next 12 months after comments from Waller and the CPI data. This is reflected in two-year yields, which have climbed 20 basis points to 4.75% on the day. A growing number of voices argue that the current Fed funds rate of 3.75-4.00% is not restraining the economy, partly due to heavy AI spending. However, by the time the Fed's rate peaks — priced in for the second half of 2027 — that AI investment boom could begin to fade.