Dallas Fed President Lorie Logan calls for at least two more 25-basis-point rate hikes and flags potential for faster winter tightening, boosting the US Dollar.
Dallas Fed President Lorie Logan called for at least two more 25-basis-point hikes and flagged possibly faster tightening this winter, saying the policy rate is at least 50 basis points below a modestly restrictive level. That hawkish signal supports the dollar, which already gained 0.60% to 1.04% against majors on the day. As one official's speech rather than an FOMC decision, the move may fade if other Fed voices differ.
Logan's call for at least two more Fed hikes and possibly faster winter tightening widens the US rate advantage over the euro area, pressuring the pair downward. The dollar was already 0.60% higher against the euro on the day. The hawkish signal comes from one official and includes a pause after two hikes, which limits follow-through.
Signals of at least two more Fed hikes and faster winter tightening lift US rate expectations relative to Japan's, favouring a stronger dollar against the yen; the dollar gained 0.52% against the yen on the day. Because this is one policymaker's view with a planned pause after two hikes, conviction is moderate.
Hawkish comments from a Fed president arguing the policy rate is at least 50 basis points below restrictive levels boost dollar rate expectations, weighing on the pound; the dollar was up 0.81% against sterling on the day. One official's remarks plus her suggestion of a pause after two hikes cap the impact.
Logan states that higher bond-market rates signal monetary policy has work to do and that more hikes are needed, with inflation meaningfully above the 2% goal and the real Fed funds rate at 78 basis points. Elevated rate-hike expectations would push Treasury yields up, meaning a rising 10-year yield. Her nod to gradual moves and a later pause argues against an outsized repricing.
Dallas Fed President Lorie Logan stated on Tuesday that the central bank requires at least two additional 25-basis-point rate hikes to reach a modestly restrictive policy level. Logan noted that the current policy rate sits 50 basis points below that target and warned that faster tightening may be necessary this winter to combat inflation trending above the 2% goal.
A Fed official signaled more rate hikes are needed, possibly faster ones this winter, and higher US interest rates make dollar holdings more attractive to investors.
The article only reports Logan's view that at least two more 25-basis-point hikes are needed with a pause afterwards, not an actual rate decision.
The prospect of additional Fed rate hikes supports the dollar against the euro, which tends to push the EUR/USD exchange rate lower.
Higher expected US interest rates make the dollar more attractive relative to the yen, which tends to push USD/JPY higher.
Because signals of more and faster Fed rate hikes strengthen the dollar, the pound loses ground against it, pushing GBP/USD lower.
It raises expectations of further rate hikes, which typically pushes longer-term Treasury yields higher.