(Bloomberg) -- Federal Reserve Bank of Dallas President Lorie Logan said high interest rates may not be restraining the economy as much as policymakers anticipate, emphasizing it’s important for officials to keep their options open for future adjustments.

“It also may be that policy is just not as restrictive as we think it might have been relative to the level of interest rates before the pandemic,” Logan said Thursday at an event in El Paso, Texas. “It’s really important to keep all options on the table and that we continue to be flexible.” 

Logan echoed comments she made earlier this month, saying that it’s too soon to think about lowering interest rates. Fed officials have held their benchmark rate in a target range of 5.25% to 5.5% since July 2023. 

Higher-than-expected inflation data at the beginning of the year pushed back expectations for the Fed’s first rate cut. Markets are now pricing in just over one cut this year, compared to the six projected at the start of 2024. Some policymakers have signaled that another rate increase shouldn’t be taken off the table.

“There’s good reasons to think that we’re headed to 2% or we’re still on that path, perhaps a bit slower and a little bit clunkier maybe than we thought at the beginning of the year, but there’s a lot of uncertainty,” Logan said. 

The latest update of the Fed’s preferred inflation gauge, for April, will be released Friday. 

Logan said Fed officials have time to watch incoming data and assess how financial conditions are evolving.

The Dallas Fed chief has previously warned that a premature easing of financial conditions could reignite demand. Yields on 10-year Treasuries climbed to around 5% last year before falling again amid a surge of market optimism. The S&P 500 has rallied almost 10% this year.

The economy’s strength in the face of high interest rates and still-robust hiring from employers has led some policymakers to question how severely policy is weighing on price pressures.

Logan also said the so-called neutral interest rate — the level of rates that neither stimulates nor weighs on the economy — has probably risen, adding to a broader debate on the topic. Logan cited increased demand for investment — from the energy transition, nearshoring and AI — as potentially shifting the neutral rate higher.

“There’s some good reasons to believe it’s higher than it was before the pandemic,” she said.

By contrast, New York Fed President John Williams said he sees “ample evidence” that policy is restrictive, and indicated he doesn’t believe the neutral rate has risen.

Read More: Fed’s Williams Sees ‘Ample Evidence’ That Policy Is Restrictive

Logan, who commented in a question-and-answer session with the Borderplex Alliance, is one of the last Fed officials to speak publicly before a mandatory communications blackout period ahead of the central bank’s June 11-12 meeting.

(Updates throughout.)

©2024 Bloomberg L.P.