Kansas City Fed President Jeffrey Schmid offered a firm defense of his decision to oppose this week’s quarter-point rate cut, arguing that the U.S. economy remains resilient and inflation too high to justify further policy easing.
In a statement, Schmid said the labor market is “largely in balance”, the economy continues to show “momentum,” and policy remains “only modestly restrictive.” On that basis, he judged it appropriate to hold rates steady at this week’s meeting.
Schmid emphasized that monetary policy should continue to “lean against demand growth” to give supply room to expand and relieve price pressures.
The Kansas City Fed chief also highlighted the uneven effects of monetary policy on the Fed’s dual mandate. He noted that current labor market stresses are more structural, driven by technology and demographics, rather than cyclical weakness that rate cuts could effectively address. As such, he questioned the utility of further easing to support employment at this stage.
On the other hand, Schmid warned that even small rate reductions could have “longer-lasting effects on inflation” if markets begin to doubt the Fed’s commitment to its 2% target.
