Logan’s Inflation Error: Burning Down the House to Roast the Pig Dallas Fed President ignores its own Trimmed Mean PCE measure at 1.92% in her speech. Ignore the Data, ignore the theory, Demand Rate hikes. This is the Fed. Lorie Logan’s speech is a clear example of a senior Fed official unable, or unwilling, to distinguish between higher output generated by investment and expanding supply and higher output driven by excess consumption. That distinction is the entire issue. New factory capacity, inventories, logistics networks, energy infrastructure, and domestic production add to supply and relieve inflation over time. Consumption that persistently outruns available output can create excess demand and sustained price pressure. They are not the same thing. Yet Logan treats stronger activity as evidence that monetary policy is insufficiently restrictive. Her claim rests in part on the observation that “The Texas Manufacturing Outlook Survey found output accelerated sharply in September.” That is the reveal. An increase in supply is not inflationary. More manufacturing output means more goods, greater capacity, fuller inventories, and fewer shortages, the very process through which an economy relieves price pressure. Logan instead treats stronger production as evidence that demand is overheating. Her assertion that “without any policy restriction, inflation will likely continue its above-target trend” simply assumes the point at issue. Inflation can remain above target while tariffs, higher energy costs, and other negative supply shocks pass through the economy. That does not establish excess demand. Nor does it demonstrate that rate hikes will improve the real adjustment. This is classic Keynesian demand-management dogma, observe healthy output and spending, presume excessive demand, and prescribe tighter money. But rate hikes cannot create energy, undo a tariff, rebuild a supply chain, or expand productive capacity. They cannot speed the adjustment to a tariff shock or a negative energy shock. They can only suppress demand, and, worse, raise the cost of the capital investment, inventories, logistics, factories, and energy infrastructure needed to adapt to those shocks. Higher rates risk delaying the supply response while weakening the economy that is generating it. Logan wants to burn down the house to roast the pig, use broad demand destruction to attack inflation that may largely reflect supply-side disruptions already working their way through the system. Growth alongside easing inflation is not proof of overheating. It may be evidence that supply is recovering. Her error is to see that recovery, call it inflationary, and then threaten to choke it off. Opening remarks for moderated conversation at Voices of the Eleventh District via @DallasFed