Fed's Logan calls for at least two more rate hikes, raising borrowing-cost risks

Dallas Fed President Lorie Logan said on October 30 that the current economic outlook calls for at least two more quarter-percentage-point rate increases to bring inflation under control. Each increase would be 25 basis points—0.25 percentage points—for a total of at least half a percentage point.^[1][2]

The Fed had held interest rates steady. Logan's remarks set out her case for further increases; the committee has yet to decide on those moves.^[3]

If the Fed adopts Logan's position, or lenders price in higher rates beforehand, floating-rate loans and new borrowing could become more expensive. Households may delay home purchases, businesses may reduce investment, and companies replacing maturing debt may face larger interest bills. Her proposed increase of at least half a percentage point keeps that cost risk in view.^[2]

Market rates have been falling: on October 30, the two-year Treasury yield was 4.56%, down from 4.61% the previous session, while the ten-year yield fell to 4.94% from 4.98%. Treasury yields help set borrowing costs and investment returns. A subsequent rise would pressure corporate financing and stock valuations, as investors could earn more from bonds.

Impact

What to watch next

• November 2, Goolsbee speech: whether another Fed official supports further hikes will help show how broadly Logan's position is shared.
• November 6, October jobs and wage data: payrolls are forecast to rise by 40,000 and unemployment to hold at 4.2%. Stronger employment or wages would bolster the case for tightening; weakness would undermine it.