Lorie Logan, President of the Dallas Federal Reserve, said that the US central bank may need to raise interest rates further.

The December 2023 FOMC meeting signaled that the majority of Federal Reserve officials are ready to start cutting interest rates this year. However, there is no clarity on when the rate cuts will begin. Meanwhile, several hawkish figures within the Fed have called for interest rates to remain high.

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Lorie Logan, President of the Dallas Federal Reserve, said on Saturday that the US central bank may need to raise its short-term interest rates further. The aim is to prevent a decline in long-term bond yields that could trigger another rise in inflation.

"If we don't maintain sufficiently tight financial conditions, there is a risk that inflation will pick back up and reverse the progress we've made," Logan said in remarks prepared for delivery at an American Economic Association conference in San Antonio, Texas.

Logan thinks the impact of the Fed's interest rate hike last year is over. In this situation, a decline in the 10Y US Treasury yield could boost demand and lift inflation again. The 10Y US Treasury yield has declined from around 5% in October 2023 to around 4% currently.

"Restrictive financial conditions have played an important role in bringing demand into line with supply and keeping inflation expectations well-anchored," Logan continued, noting that US inflation has fallen close to the Fed's target and the US labor market is rebalancing, "We can't count on sustaining price stability if we don't maintain sufficiently restrictive financial conditions."

Logan's statement signaled a "resistance" effort from the Fed's hawkish camp over widespread expectations of interest rate cuts. However, market participants don't seem to care much about it.

The majority of market participants still believe the Fed will start lowering interest rates in the next few months. The US dollar also struggled in major pairs on Monday (January 8). The US Dollar Index (DXY) slipped around 0.3% to 102.16 at the time of writing in the New York session.

Lorie Logan was a voting member of the FOMC in 2023 but shifted to a non-voting alternate member in 2024. The change in status reduces market attention to her views.

FOMC rules outline that a number of regional Federal Reserve leaders take turns getting a vote in the highest decision-making ranks at the US central bank each year. The two hawkish FOMC members in 2023 - including Logan - are replaced by dovish FOMC members in 2024. This means that the FOMC in 2024 will be more likely to lower than raise interest rates.