Dallas Federal Reserve Bank President Lorie Logan indicated yesterday that it might take some time before policymakers understand how the economy will react to tariffs and other policy changes, and consequently, how they should adjust interest rates.

This statement, coming from one of the key Fed leaders, underscores the growing uncertainty faced by the central bank. Traditional economic models used for forecasting have become less reliable amid rapidly changing geopolitical conditions and protectionist measures. The impact of tariffs and other trade restrictions on the economy is complex and multifaceted. On one hand, they can protect producers and create new jobs. On the other hand, they tend to increase prices for consumers, reduce competitiveness, and slow global economic growth.

In a prepared speech at an event in Waco, Texas, on Thursday, Logan outlined several risks to the economic outlook. "Tariffs could lead to price increases — either temporarily or more sustainably if inflation expectations rise," she said. "Fiscal policy or regulatory changes might boost demand, but economic uncertainty and market volatility could also cause retrenchment among consumers and businesses, affecting growth."

Many Fed officials emphasize the labor market, which allows them to maintain a wait-and-see approach, and Logan is no exception. "At this point, with the labor market remaining strong, inflation gradually returning to the target, and risks to the FOMC's goals roughly balanced, I believe monetary policy is in a good place," she said. "It may take some time to determine whether the balance of risks is shifting in one direction or another," she added.

At its last meeting, the Fed left interest rates unchanged and is expected to do so again when officials gather in June. Minutes from the May 6–7 meeting showed that officials generally agreed that increased economic uncertainty warrants patience in adjusting borrowing costs.

Last month, when the Trump administration initially announced higher-than-expected tariffs for U.S. trading partners, Logan noted they would likely lead to higher prices and unemployment. However, many tariffs were suspended or temporarily reduced while negotiations with countries continue.

The latest de-escalation between the U.S. and China revived optimism among consumers, and confidence rebounded this month after plunging to nearly a five-year low in April. At the same time, jobless claims rose to their highest level since 2021, heightening concerns that the unemployment rate may rise soon.

Fed officials have expressed concern that tariffs could put them in a difficult position, forcing them to choose between maintaining high rates to curb renewed inflationary pressures or lowering rates to support a weakening economy.

Regarding inflation, Logan emphasized that the economic outlook is currently difficult to predict. She also warned about the consequences of higher inflation expectations. "If expectations for higher inflation become entrenched, inflationary pressures could persist, and dealing with that could become very costly," she said.

Logan also touched on the independence of the central bank — a topic that has resurfaced amid ongoing pressure from Trump on the Fed and its chairman Jerome Powell to lower rates. "Research shows that central banks do better at controlling inflation when they are independent from short-term political considerations," Logan said. "This pattern is evident worldwide and throughout history."

As for the current technical picture of EUR/USD, buyers need to focus on reclaiming the 1.1340 level. Only then will it be possible to aim for a test of 1.1375. From there, a move to 1.1420 could be attempted, but achieving this without the support of major players will be quite difficult. The ultimate target remains at the 1.1450 high. In case of a decline, significant buyer activity is expected only around the 1.1300 level. If no strong buying occurs there, it would be wise to wait for a retest of the 1.1260 low or consider long positions from 1.1221.

As for the current technical picture of GBP/USD, buyers of the pound need to break through the nearest resistance at 1.3495. Only this will allow aiming for 1.3540, above which a breakout will be quite challenging. The ultimate target will be the 1.3585 level. In case of a decline, bears will attempt to regain control at 1.3465. If successful, breaking this range would deliver a serious blow to the bulls' positions and push GBP/USD toward the 1.3435 low, with a prospect of reaching 1.3410.