Macro
Fed's Logan and Musalem Say More Rate Rises Are Needed After October Hold
Two regional Fed presidents argued for further tightening days after the FOMC held its target range at 3.75% to 4%.
HedgeWeekly News Desk ·
Dallas Fed President Lorie Logan said on Friday that the Federal Open Market Committee needs at least two more quarter-point rate increases. She told students at Davidson College that skipping a meeting does not change where policy is heading, and that the Fed should pause once those moves are made to assess economic and financial conditions.
St. Louis Fed President Alberto Musalem went further on timing. Speaking to the Shadow Open Market Committee in New York, he said additional firming "will be necessary, and soon," arguing that smaller, earlier moves disrupt markets less than larger, abrupt ones later. He called financial conditions accommodative and said inflation, running above 3% on the latest PCE reading, remains too high.
The remarks followed the committee's decision on Wednesday to hold its target range at 3.75% to 4%. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented in favour of a hike. Logan, who votes this year, said the hold reflected volatile markets and gave the public time to adjust to higher borrowing costs. Musalem is not a 2026 voter. Third-quarter GDP growth of 3.4% annualised, which Musalem described as resilient, supports the case he is making.
For funds and allocators, the signal is that the debate has moved from whether to tighten to how fast, and Logan's two-hike marker gives a rough endpoint to price against. CME's FedWatch tool showed about a 76% chance of a December quarter-point rise, though Reuters reported that futures have eased their hike expectations. The US 10-year Treasury yield stood at 4.93% in late trading on Sunday, per Newsquawk. Watch the December 8-9 FOMC meeting and the inflation data before it.