03:42 PM EST, 11/13/2024 (MT Newswires) -- The Federal Reserve needs to proceed carefully with easing monetary policy amid upside risks to inflation, two Fed officials said Wednesday.

On Thursday, the central bank's Federal Open Market Committee reduced its benchmark lending rate by 25 basis points, following a 50-basis-point cut in September. Although inflation has made progress toward policymakers' 2% target, it remains "somewhat elevated," the committee said at the time.

The FOMC will "most likely" need to reduce rates further, but it's difficult to predict the frequency and timing of rate cuts amid upside risks to inflation due to strong demand and supply disruptions, Dallas Fed President Lorie Logan said Wednesday. Logan won't be an FOMC voting member until 2026.

Monetary policy potentially faces challenges from unexpectedly healthy demand or supply shocks that could keep inflation above 2%, Logan said. "Tightening financial conditions could trigger a rapid deterioration in the labor market," she said. Another threat is that financial conditions could "ease too much" if the neutral interest rate proves to be higher than projected.

So far, US economic activity has been resilient, while labor market has been "cooling gradually, not weakening materially," Logan said. "If we cut too far, past neutral, inflation could reaccelerate and the FOMC could need to reverse direction," she added. "In these uncertain but potentially very shallow waters, I believe it's best to proceed with caution."

Official data showed Wednesday that US consumer inflation rose in line with Wall Street's projections in October, boosting bets that the FOMC will again cut interest rates by a quarter percentage point next month.

Separately, St. Louis Fed President Alberto Musalem said recent data indicate the risk of inflation not dropping to 2% or moving higher, has increased, while the risk of an "unwelcome deterioration" in the labor market has held steady or possibly declined.

"Further easing toward a neutral policy stance will be appropriate to support employment if inflation continues to converge toward 2%" Musalem said. "Given current economic conditions and the balance of risks, I believe the FOMC can judiciously and patiently evaluate incoming information in considering further lowering of the policy rate."

The labor market has cooled over the last year, and now appears to pose less inflationary pressure than it did a year ago, according to Musalem, who is an alternate member of the FOMC this year. An alternate member votes at an FOMC meeting if a scheduled voter is unable to attend.

"This may well be the last mile on the journey to price stability, and I believe the economy will reach the destination with appropriate monetary policy," Musalem said. "There is more work to do."