(Washington) The United States Federal Reserve (Fed) must continue its monetary tightening policy in order to bring inflation “on target in a sustainable and timely manner”, said Lorie Logan, member of the central bank’s monetary committee (FOMC) on Thursday. ).
Given the economic environment, “the FOMC must pursue a more restrictive policy in order to bring inflation back to target in a sustainable and timely manner,” Ms. Logan said, noting that she deemed it “totally appropriate to raise rate at the June meeting”.
At that meeting, however, the FOMC decided to take a break after 10 consecutive rate hikes since March 2022, which had brought Fed rates into a range of between 5% and 5.25%.
In the minutes of the meeting (the “minutes”), released Wednesday, the Fed pointed out that “some” members had spoken in favor of another rate hike before finally voting to pause.
This was particularly the case for Ms. Logan, she explained, saying that “in an uncertain and difficult environment, pausing during a meeting and taking it more gradually makes sense”.
Emphasizing that “financial conditions matter more than the economy”, Lorie Logan added that she hoped “the communications elements from the June meeting will send a strong signal to the markets and lead to a tightening of financial conditions”.
A tightening that should be helped by the Fed’s balance sheet reduction currently being carried out, which consists of putting some of the securities purchased back on the market when it was necessary to support the financial sector by providing it with liquidity.
By reinjecting these assets into the market, the central bank effectively reduces available liquidity, thus creating the conditions necessary for this tightening of financial conditions, in addition to the rise in rates.
If the Fed took a break in June, its chairman, Jerome Powell, has since pointed out on several occasions that at least two additional hikes are planned, possibly in a row.
Nevertheless the next actions of the American central bank will be based on the available macroeconomic data, he insisted.
The next meeting is scheduled for the end of the month, July 25-26.