Lorie Logan, President of the Federal Reserve Bank of Dallas, said the Fed should not let balance sheet issues distract from its main mission. She said balance sheet growth is acceptable if it meets the public\u2019s needs, and policy should be driven by what is best for the economy.<\/p>\n
She said it costs the Fed little to meet bank reserve demand and that lowering reserve demand is preferable to returning to a scarce reserves system. She described the current ample reserves system as \u201cefficient and effective\u201d, but said there are many options with complex links for reducing the balance sheet.<\/p>\n
Logan said pushing banks to use fewer reserves would raise financial system risk, and broader access to Fed liquidity tools could reduce reserve demand. She said some ways to lower reserve demand would need action outside the Fed, and she supported holding policy steady at the recent FOMC meeting.<\/p>\n
She said the labour market stabilised in the second half of 2025 into this year, but payroll gains have been \u201cpretty weak\u201d and \u201cuncomfortable\u201d. She said immigration has shifted the job market breakeven to close to zero.<\/p>\n
She said she was not convinced inflation was easing enough even before the war, while business investment was strong and consumers were resilient. She said the Iran war has raised uncertainty and risk on both sides of the Fed\u2019s mandate, making forecasts hard; a swift resolution could keep impacts \u201cpretty moderate\u201d, and policy is set to respond to data.<\/p>\n
We are facing a difficult environment where weak job growth is colliding with persistent inflation, all under the shadow of geopolitical conflict. The last Non-Farm Payrolls report we saw in March 2026 showed a gain of only 55,000 jobs, far below expectations and confirming the uncomfortable weakness. This puts the Federal Reserve in a bind, as the most recent CPI data for February 2026 remains stubbornly high at 3.8%.<\/p>\n
This high level of uncertainty suggests that market volatility is the primary factor to consider in the coming weeks. The tension between needing to support a faltering labor market and needing to fight inflation, especially with the Iran war disrupting energy markets, means the Fed’s next moves are highly unpredictable. We have seen the VIX index reflect this, consistently trading above 22 since the conflict began early this year, making long volatility positions via options attractive.<\/p>\n
For interest rate traders, this implies the Federal Reserve may be forced to remain on hold longer than previously anticipated. The Fed is unlikely to hike rates into a weakening jobs picture, but it cannot cut them while inflation and energy prices are a major concern. This suggests trading strategies that benefit from a range-bound but volatile short-end of the curve could be profitable.<\/p>\n
The comments on energy production are particularly noteworthy for commodity traders. The observation that US producers are not dramatically increasing output, despite WTI crude holding above $105 per barrel, points to sustained higher energy prices for the foreseeable future. We saw a similar reluctance to ramp up drilling back in 2022 and 2023, which suggests that long positions in energy futures or call options are well-supported.<\/p>\n
The underlying labor market dynamics have clearly shifted, and we must adjust our view of what a “strong” jobs report looks like. The idea that immigration has lowered the breakeven point for payroll growth means that even seemingly positive reports in the future might not pressure the Fed to tighten policy. This structural change provides a dovish undertone that could cushion markets if we see further economic slowing.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Logan says Fed should focus on economy, accept balance sheet growth, keep ample reserves, and monitor inflation risks.<\/p>\n","protected":false},"author":103,"featured_media":17026,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-46263","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/46263","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/103"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=46263"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/46263\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17026"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=46263"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=46263"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=46263"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}