The U.S. economy is strong and stable, with Federal Reserve Chairman Jerome Powell calling for gradual interest rate cuts

According to the Wise Finance APP, Logan, a 2026 FOMC voter and President of the Federal Reserve Bank of Dallas, stated on Monday that if the economy develops as she expects, "gradually lowering policy rates to a more normal or neutral level can help manage risks and achieve our goals."

Logan stated: "The economy is strong and stable." Inflation and employment are close to the Federal Open Market Committee (FOMC) targets, "without being severely overheated." This allowed the FOMC to cut its policy rate by 25 basis points last month.

However, Logan added: "There are still significant uncertainties. Downside risks to the labor market have increased, and while upside risks to inflation have weakened, they still exist. Many of these risks are difficult to assess and measure."

The potential impact on the economy will affect the speed of policy normalization and the eventual stable level of interest rates. "In my view, the FOMC will need to remain flexible and be willing to adjust when appropriate," she said.

The normalization of the Fed's balance sheet is also ongoing. She refuted the view that reducing assets on the balance sheet is contradictory to policy easing through lowering the federal funds rate target range. Logan stated that with the Fed lowering rates, "policy rates remain restrictive, which is consistent with creating restrictions by reducing asset holdings."

She also emphasized that the Fed is normalizing two tools, both of which are at elevated levels. Logan stated: "In my view, the normalization of these two tools is complementary and consistent. Other central banks are also reducing asset holdings while lowering policy rates to address evolving economic outlooks."

She also discussed the Fed's holdings of Mortgage-Backed Securities (MBS). The Fed has indicated plans to primarily hold U.S. Treasury securities long-term. The reduction in MBS holdings is slow because if homeowners' current mortgage rates are higher than the initial rates, they have little incentive to refinance. Agency debt and MBS currently account for 34.4% of the face value of securities held by the Fed, up 0.5 percentage points from early 2024.

Some FOMC members have suggested the Fed sell MBS to bring the portfolio closer to its target. Logan stated: "But in my view, this is not a short-term issue."