Kansas City Fed President Schmid Signals Patience in Rate Cut Decision Amid Inflation Concerns

Kansas City Federal Reserve President Schmid hinted that he is not yet ready to support interest rate cuts, citing inflation being higher than target levels and a labor market that, although slightly cooling, remains healthy. At a speech to the Kansas Bankers Association, Schmid stated that the recent decline in inflation is "encouraging" and that additional reports showing lower price pressures would increase his confidence that inflation is returning to the central bank's 2% target, which could then enable a cut in interest rates.

"We are close but not quite there yet," Schmid said. He did not specify when the Federal Reserve should cut rates, stating that the "policy path will be data-driven and based on economic momentum."

Despite weaker-than-expected nonfarm payrolls data for July, Federal Reserve officials have ignored calls for drastic action. The market anticipates a more than 50% chance that the Fed will cut rates by 50 basis points in September.

"Overall, the labor market still appears healthy," Schmid said. "Last week's July employment report made some question this resilience. However, it's worth noting that many other indicators still show ongoing strength."

Notably, Schmid does not hold voting power in this year's FOMC meetings.