Federal Reserve Bank of Dallas President Lorie K. Logan outlined key challenges for monetary policy in 2025, citing persistent inflation risks, shifting global trade patterns, and the transition to a higher-interest-rate environment.

Logan said central banks had to be adaptable in reacting to changing economic circumstances while speaking at the Chapultepec Conference, which was sponsored by the Americas Office of the Bank for International Settlements.

Logan claims inflation has moved near the 2% objective set by the Federal Open Market Committee, but prior tendencies point to price volatility may be continuing. She observed that while similar swings may develop this year, inflation had slowed in late 2023 before resurging in early 2024. She warned that should inflation rise, the Fed could have to operate more aggressively to keep prices steady.

Logan also underlined that interest rate reductions may not be justified even if inflation levels out at 2%. She referred to robust consumer spending and excellent labor market conditions, saying that monetary policy may already be almost neutral, in which case it neither boosts nor slows down economic growth.

Talking about world trade, Logan emphasized studies indicating that tariffs on China have helped Mexican companies linked to international supply chains develop. The Dallas Fed recently established a Global Institute to investigate these changes and evaluate how they could affect capital flows, inflation, and employment, she added.

Logan observed on interest rate policy that estimates of the neutral rate—that is, the level at which monetary policy is neither accommodating nor restrictive—have probably increased in recent years. She said that while some market players hope for rate reductions, monetary policy choices should remain data-dependent and take continuous economic uncertainty into consideration.