(Bloomberg) -- As Federal Reserve officials debate what to do with their massive asset portfolio this year, the place investors are looking to for guidance is about 1,400 miles southwest of Wall Street.

Lorie Logan became president of the Dallas Fed in August 2022 after more than two decades at the New York Fed, where she rose from an entry-level analyst to become one of its most senior officials, managing the central bank’s balance sheet. In that role, she helped oversee the Fed’s last effort to pare its portfolio, which in 2019 culminated in market turmoil that investors and policymakers are anxious to avoid repeating this time around.

That’s turned Dallas into an important if unlikely source of information on “quantitative tightening” as the Fed navigates the fraught process of once again trying to reduce its footprint in financial markets, after buying up assets to cushion them from the blow of the pandemic.

This became especially evident in early January, when Logan, 51, said in a speech that policymakers should start thinking about when and how they would begin tweaking the program. But in an interview, she suggested she may have been misunderstood: She doesn’t want to necessarily stop shrinking the Fed’s portfolio anytime soon.

“What surprised me from the market reaction was that some, I think, connected slowing to stopping,” Logan said in the Feb. 15 interview. “We just need to disconnect those concepts — that slowing doesn’t mean stopping, but really just means managing the pace.”

That speech, at a conference on a Saturday morning, made waves on Wall Street. Come Monday morning, analysts moved up and solidified forecasts for when adjustments to the QT program might start, mapping out the process along 2019 lines.

“It got a lot of attention, as it should have,” said Bill Dudley, the former New York Fed president who worked closely with Logan during his time there. “She probably has the deepest understanding of any senior person in the Fed about that kind of stuff.”

Logan’s latest comments suggest the Fed may not be inclined to follow the balance-sheet playbook from six years ago, when a decision to slow the pace of the portfolio’s reduction signaled it would soon stop altogether.

Read More: Fed QT Gets Room to Run Longer as Funding-Market Pressures Abate

For Logan, financial markets are the Fed’s gateway to the economy. Besides balance-sheet questions, policymakers are weighing when to begin cutting their benchmark interest rate, after raising it in 2023 to the highest level in decades.

As Dallas Fed chief, she’s sketched out an assertively hawkish stance on inflation. Even now, she doesn’t think the idea of additional rate increases should be taken off the table just yet.

“I start the day looking at markets and asset prices, and have been doing that for over two decades,” Logan said in her office, where she keeps a Bloomberg terminal at her desk. “Understanding those developments in financial conditions, I think, is critical for forming my outlook about the economy.”

Logan was in some ways a surprising choice to lead the Dallas Fed. She has no connections to Texas, nor the parts of New Mexico and Louisiana also overseen by the reserve bank. In Congress, some lawmakers lamented that a Hispanic American wasn’t named to the position after they had pushed for it. It was an especially noticeable omission for the Dallas Fed, whose region has the largest Latino population.

But Logan’s market chops were widely lauded, as many local economists hoped the selection would bring prestige to the region. Meanwhile for some Fed watchers back in New York, it’s a welcome decentralization of knowledge.

“Lorie has pulled together a think tank down in Dallas with significant expertise,” said Lou Crandall, chief economist at Wrightson ICAP LLC. “The diffusion of interest in and attention to balance sheet issues can only be a positive because the balance sheet as a component of Fed policy is not going to go away anytime soon.”

World Trade

Logan cut her teeth on crises that had serious ramifications for financial markets. When the World Trade Center was attacked on the morning of Sept. 11, 2001 — just three blocks from the New York Fed — she and her colleagues took shelter in the basement for several hours.

Then a trader in the markets group, Logan had been on the schedule to handle the Fed’s regular lending operations, which happened daily around noon. She and two others, one of whom now works for her in Dallas, went back upstairs to deal with the liquidity crunch that was engulfing markets. Don Kohn, a top Fed official in Washington, instructed the New York team to “lend it all,” Logan recalled.

That experience, which came just two years into her career at the Fed, also illustrated the importance of contingency planning. Two decades later, that lesson paid off when the pandemic hit, as hundreds of billions of dollars of lending operations that proved critical to keeping markets afloat were conducted in the home offices, living rooms and at the kitchen tables of Fed employees.

After taking the Dallas job, Logan embarked on a yearlong tour to get to know the district better, visiting Permian Basin oil rigs and the San Antonio headquarters of popular grocery chain H-E-B.

The Permian is the top-producing oil basin in the western hemisphere, and the Dallas Fed has long published energy-focused research and held conferences on the topic. The US oil industry is now the biggest crude producer in the world, and the sector is heavily reliant on banks and other financial institutions for funding.

“The linkages to financial markets broadly are very deep on the energy side,” said Timothy Fitzgerald, a Texas Tech University economist. “Her financial experience is going to put her in a really strong place, in maybe unexpected ways.”

In the past, those links have left banks, especially smaller ones, exposed to the frequent boom-and-bust nature of oil. More recently, bigger players like Charles Schwab Corp. have also relocated there, heightening its importance as a regional financial center.

For Logan, who often credits her upbringing in the small town of Versailles, Kentucky (pronounced Ver-sales, unlike its French namesake) for instilling in her a respect for public service, life in Dallas has been a welcome change from the more brusque and impersonal day-to-day in New York. 

“It feels a lot more like home,” Logan said earlier this month at an event in Hurst, Texas. “For many years when I was living in New York, I couldn’t even tell you who my neighbors were. But when I leave my building in Dallas it takes me about 30 minutes, because you’ve got to talk to everybody along the way, because it’s such an open and welcoming place. I love that.”

Logan isn’t even two years into her tenure in Dallas, which in theory could continue until she turns 65. But her commanding voice on financial issues makes speculation that she could ultimately end up back in New York hard to avoid.

“She has that gravitas with markets, in terms of her having been at the New York Fed and now the Dallas Fed through several different crises, and knowing where the bodies are buried, where the pain points are,” said Derek Tang, an economist with LH Meyer/Monetary Policy Analytics. “That’s not something that really can be replicated.”

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