01:54 PM EDT, 10/21/2024 (MT Newswires) -- The Federal Reserve should "gradually" reduce its benchmark lending rate to help manage risks to inflation and the labor market, if the economy evolves as projected, Dallas Fed President Lorie Logan said Monday.

Last month, the central bank's Federal Open Market Committee lowered interest rates by 50 basis points to a range of 4.75% to 5%. A Bloomberg-compiled consensus had indicated a quarter-percentage-point cut. The FOMC tightened monetary policy from March 2022 through July 2023 to tame inflation.

Policymakers decided to cut rates in September as inflation and employment came in "striking distance of the FOMC's goals rather than seriously overheated," Logan said Monday in remarks prepared for a speech at the Securities Industry and Financial Markets Association annual meeting. "Less restrictive policy will help avoid cooling the labor market by more than is necessary to bring inflation back to target in a sustainable and timely way."

The FOMC's summary of economic projections showed in September that members trimmed their median federal funds rate outlooks from 2024 through 2026 and raised their unemployment rate expectations.

Logan said Monday that although the economy is strong and stable, the macro outlook continues to face "meaningful" uncertainties. Downside risks to the labor market have grown, while inflation poses "diminished but still real upside" risks, she added.

"If the economy evolves as I currently expect, a strategy of gradually lowering the policy rate toward a more normal or neutral level can help manage the risks and achieve our goals," Logan, who doesn't vote on monetary policy decisions until 2026, said. "However, any number of shocks could influence what that path to normal will look like, how fast policy should move, and where rates should settle."

Official data released earlier this month showed that US consumer inflation increased at a more-than-expected pace in September, while the economy added more jobs than projected and the unemployment rate edged down.

Markets are currently pricing in a roughly 85% probability that the FOMC will cut rates by 25 basis points next month, with the remaining odds in the favor of monetary policy remaining unchanged, according to the CME FedWatch tool.

"I continue to pay close attention to financial conditions and to the information I receive from the Dallas Fed's surveys, from business and community contacts, and from market participants," Logan said Monday. Policymakers will need to "remain nimble and willing to adjust" rates, if appropriate, she added.