Fed official says no rate cuts yet, inflation still above target

Speaking to the Kansas Bankers Association, Schmid said the recent decline in inflation was “encouraging” and that further reports of low price pressures would add to his confidence that inflation was on track to the central bank’s 2% target, and thus cut interest rates.

“We are close to that goal, but we are not there yet,” Schmid said. Schmid did not offer his view on when the Fed should cut rates: “The path of policy will be determined by the data and the strength of the economy.”

Federal Reserve policymakers rejected calls for aggressive action in the wake of weaker-than-expected data. Jobs Report In July, hiring slowed markedly and the unemployment rate rose to its highest level in nearly three years. Markets are pricing in a higher-than-average chance of a half-percentage-point cut in September.

“Overall, the labor market continues to look healthy,” Schmid said. “Last week’s employment report for July led many to question this resilience. But it’s important to note that many other indicators point to continued strength.”

He added that business communications at the Kansas City Fed district were characterized by a “general tone of optimism and resilience.”

Last week, policymakers left interest rates unchanged at their highest level in more than two decades, but signaled they were closer to lowering borrowing costs. Fed Chairman Jerome Powell said a rate cut could be in order as soon as the central bank meets in September.

Schmid, who is among the Fed’s most hawkish officials, said the rise in inflation to its highest level in several decades two years ago calls for caution in assessing progress and “we should be looking for the worst in the data, not the best.”

Schmid was appointed to lead the Kansas City Fed last August. The former CEO of the Southwestern University Graduate Banking Institute at Southern Methodist University’s Cox School of Business is a longtime banker and bank regulator.