By Sheila Dang

AUSTIN, Texas (Reuters) – Dallas Federal Reserve Bank President Lorie Logan on Tuesday said recent data showing inflation is cooling is “welcome news” but that the U.S. central bank can stay patient on interest-rate policy.

“We’re going to need to see several more months of that data to really have confidence in our outlook that we’re heading to 2%,” Logan said at an event in Austin, Texas. “We’re in a good position, we’re in a flexible position to watch the data and to be patient.”

Last week the Fed decided to keep the policy rate in the 5.25%-5.5% range, where it has been since last July, as it seeks to maintain downward pressure on inflation by keeping borrowing costs at their highest in more than two decades.

Inflation data published in the middle of that two-day meeting showed consumer prices did not rise at all in May from April, signaling the potential resumption of progress after what Logan called a “disappointing” several months.

In their latest quarterly projections, issued last week, the Fed’s 19 policymakers penciled in just one interest-rate cut this year, instead of the three rate cuts they had forecast back in March.

Logan did not say when she expects the Fed could cut rates, or by how much, though her reference to “several” months of good data suggests she could be open to a rate cut as soon as September.

That’s when financial markets currently expect the Fed to act.

Logan said she sees potential for geopolitical risks around the world to put upward pressure on commodity and food prices. Lingering supply chain issues from the pandemic are another concern, she said.

“I think there are still some upside risks to inflation that we have to keep our eyes on,” she said. And, she said, structural changes since the pandemic likely mean that interest rates will not return to the low levels seen before the pandemic.

At the same time, generative artificial intelligence could have a positive impact on productivity growth, which could ease price pressures.

One medium-sized business told her AI improved productivity by 20%, Logan said. Improved productivity could have important implications for monetary policy, but more study is needed, she added.

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