Fed's Dallas CEO Logan discusses inflation, banking regulation, and discount window

Investing.com -- Lorrie Logan, the President and CEO of the Federal Reserve Bank of Dallas, delivered a speech today at the 159th Assembly for Bank Directors, Southwestern Graduate School of Banking at Southern Methodist University in Palm Springs.

Logan emphasized the importance of the upcoming inflation data over the next couple of months. She suggested that even if the inflation data improves, the Federal Reserve should remain cautious about adjusting rates. Logan also noted that a strong labor market doesn't necessarily mean the Federal Reserve can cut rates.

She highlighted the Federal Reserve's focus on geopolitical and policy changes, stating that they are taking their time to understand how these changes affect the economy.

Logan expressed optimism about the loan demand and economic growth among Texas banks. She called for the tailoring of banking regulation based on the size and risk profile of the banks. Logan emphasized the critical importance of every U.S. bank being set up to use the Federal Reserve's discount window.

She noted that work is needed from both the Federal Reserve and banks to get more banks signed up to the discount window and posting collateral. Logan pointed out that there are still banks that are not signed up to the discount window and some that do not test it. The Federal Reserve wants banks to use the discount window, and they are focused on modernizing it and improving its interoperability with the FHLB system.

Logan also mentioned the importance of the CFPB's consumer compliance activities, stating that all institutions should maintain good compliance. She noted that some of the increase in long-term rates came from expectations for stronger economic growth and the expectation that the Federal Reserve policy rate will stay higher for longer. She also attributed some of the increase in long rates to inflation views.

Logan stressed that the level of long-rates is a key factor in assessing financial conditions. She said that while the Federal Reserve is prepared to lower rates further if necessary, the current focus is on restoring 2% inflation.

She also shared insights gained from SVB failures about how quickly a bank run can occur, highlighting the critical importance of liquidity. Logan noted that deposit insurance may not be providing a level playing field for small banks versus large banks.

Finally, Logan reiterated the Federal Reserve's commitment to restoring price stability and achieving the 2% inflation target.

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