Kansas City Federal Reserve President Jeffrey Schmid emphasized the need for more comprehensive economic data before backing any move to lower interest rates. In an interview with Bloomberg’s Michael McKee, recorded on Wednesday and aired Thursday, Schmid acknowledged that while inflation is trending downward, caution is warranted before making further policy decisions.
“For me, it’s prudent to carefully evaluate the upcoming data before recommending any action,” Schmid stated ahead of the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming. Although he does not have a voting role in rate decisions this year, Schmid’s perspective underscores a broader sentiment within the Federal Reserve for a measured approach.
His comments come on the heels of the Federal Reserve’s July 30-31 policy meeting minutes, which revealed that while several officials saw a case for cutting rates last month, the majority preferred to wait until the September meeting. Schmid highlighted the importance of avoiding premature decisions, cautioning that a hasty reduction in rates could spur an uptick in demand that might counteract recent progress on inflation.
Since July 2023, the Fed has maintained its benchmark interest rate at the highest level in over 20 years. Despite cooling inflation and some signs of stress in the labor market, investor expectations have solidified around a potential 100 basis points of rate cuts across the remaining three policy meetings in 2024.
Recent data showed inflation, excluding volatile food and energy prices, eased for the fourth consecutive month in July. Additionally, the unemployment rate climbed to 4.3%, a notable increase from the post-pandemic low of 3.4% reached last year.
Schmid also addressed a report from the Bureau of Labor Statistics released on Wednesday, which indicated that payroll growth for the year through March was likely overstated by 818,000 jobs. This revision suggests that the labor market has been cooling for a longer period than initially believed. However, Schmid downplayed the impact of this finding on his overall view of monetary policy. “While it’s a significant number, it doesn’t fundamentally alter my approach to monetary policy,” he remarked.
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