Kansas City Federal Reserve President Schmid said in an interview that although U.S. inflation is moving in the expected direction, the Fed needs to remain patient and await more economic data before supporting a rate cut. He pointed out that closely examining economic indicators in the coming weeks is crucial for making decisions.
As one of the more hawkish members of the Federal Open Market Committee (FOMC), Schmid, although not holding a voting right on this year's monetary policy, still provides valuable insights. He emphasized that sufficient information is needed before taking or recommending any action.
The minutes from the Fed's July meeting show that most officials believe it would be appropriate to start cutting rates at the next meeting, with a few even advocating for easing monetary policy in July. The Fed has not adjusted interest rates for more than a year, with the federal funds rate target range remaining at 5.25% to 5.5%. The market widely expects the Fed to initiate a rate cut at its September 17-18 meeting, though opinions differ on the extent of the cut.
Schmid also warned that if decisions are not made cautiously, there could be a slight rebound in demand, affecting economic stability.
According to the latest data, U.S. inflation has slowed for the fourth consecutive month, excluding volatile items like food and energy, while the unemployment rate rose from 3.7% at the beginning of the year to 4.3% in July. These trends provide conditions for the Fed to initiate rate cuts. Additionally, the U.S. Bureau of Labor Statistics reported a downward revision of 818,000 nonfarm jobs for the 12 months ending in March 2024, indicating a greater-than-expected cooling in the labor market.
Despite this, Schmid is not overly concerned about this employment data revision. He stated, "While this is a significant correction, it does not significantly impact my stance when considering monetary policy."
