Kansas City Fed President Jeff Schmid speaks to CFA Society Kansas City on the economic outlook and monetary policy.
In balancing its foals the Fed must maintain inflation credibility
Inflation is too high, ‘worrying’ that price increases are becoming more widespread
Monetary policy is appropriately calibrated
Labor market cooling, remains healthy
Monetary policy only slightly restrictive
Aggressively boosting demand could raise risk of outsized increase in prices
Monitoring alternative labor market, price data closely
Expect tariffs to have muted effect on inflation
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Kansas City Fed President Jeff Schmid said he sees little need for more rate cuts, arguing that the central bank should prioritise preserving its inflation-fighting credibility as it balances between the risks of tightening too much or easing too far.
Schmid backed the September quarter-point rate cut as a measured step given signs of a cooling labour market, but stressed that employment remains broadly healthy and inflation still too high, particularly in services, where price growth has stabilised around 3.5% — well above the Fed’s 2% goal.
He warned that price increases are becoming more widespread, with nearly 80% of inflation categories rising as of August. While he expects tariffs to have only a muted effect on inflation, he said this shows monetary policy is appropriately calibrated, not that it should be eased further.
Schmid acknowledged the trade-offs facing policymakers — lowering rates could boost jobs but risk reigniting inflation, while keeping policy tight could slow hiring. “In balancing this constraint, the Fed must maintain its credibility on inflation,” he said.
He added that the economy retains momentum, supported by AI-driven business investment, resilient equities near record highs, and narrow corporate bond spreads. Overall, Schmid described monetary policy as only slightly restrictive, and “in the right place to be” ahead of the late-October FOMC meeting, where markets still expect another quarter-point cut.
