The tone then shifted quickly with Dallas Fed Pres Logan (non-voter 2024/25), who said "it behooves us to proceed cautiously at this point", because while "the FOMC will most likely need more rate cuts to finish the journey...it’s difficult to be sure how many cuts may be needed and how soon they may need to happen." Most hawkish of all was her musing that the Fed may already have reached neutral: she cited model-estimates that are relatively wide: "neutral fed funds rate of 2.74 to 4.60 percent" (vs 4.58% currently). Interestingly while her short-term rate views appear neutral/slightly hawkish, she is concerned about the sell-off at the long end of the curve and says because it is term premia-led it may mean the Fed needs even less restrictive policy: "Higher term premiums can tighten financial conditions for any given setting of monetary policy and thereby slow the economy more than the FOMC intends. If term premiums continue to rise, the FOMC may need less restrictive policy, all else equal, to accomplish its goals."
St Louis Fed President Musalem (2025 voter) was typically cautious on future rate cuts (link): "I believe the FOMC can judiciously and patiently evaluate incoming information in considering further lowering of the policy rate. Future adjustments to the policy rate can be accelerated, slowed or paused as appropriate in response to new information about the outlook and risks for the price stability and employment objectives." Like his fellow hawk Logan, Musalem pointed to downside risks to employment stemming from higher long-term rates, even as the Fed is attempting to ease restriction by cutting short-end rates. He went a little further than Logan in tying the rise of long-end premia to the Fed potentially "easing too much too soon" - in other words, cutting the Fed funds rate too quickly or too much poses risks to the employment side of the mandate by increasing long-end borrowing costs. Additionally, "recent information [including perhaps the CPI data released that morning] suggests to me that the risk of inflation ceasing to converge toward 2%, or moving higher, has risen, while the risk of an unwelcome deterioration in the labor market has remained unchanged or possibly fallen."
KC Fed President Schmid (2025 voter) echoed his colleagues in expressing uncertainty over where rates will ultimately settle: "While now is the time to begin dialing back the restrictiveness of monetary policy, it remains to be seen how much further interest rates will decline or where they might eventually settle." His speech is longer-term focused for the most part though (Full text here).
