Fed's Schmidt: "No Need for Preemptive Adjustment... Patience Required for Rate Cuts"

Jeffrey Schmid, President of the Federal Reserve Bank of Kansas City, stated on the 26th (local time) that patience is required before lowering the benchmark interest rate amid inflation exceeding the 2% price stability target and a still robust labor market.

[Image source=Reuters Yonhap News]

According to Bloomberg News, President Schmid said in remarks at an event held in Oklahoma City, Oklahoma, "In the current situation, I do not see the need to proactively adjust the policy stance." He added, "We need to wait for convincing evidence that we have won the fight against inflation," and diagnosed that "the best course of action is to be patient and continue to observe the economy's response to tightening policies."

He took office last August as the successor to retired President Esther George. He has built his career in regulatory agencies and the banking industry, including the Federal Deposit Insurance Corporation (FDIC) and Omaha Mutual Bank, and served as dean of the Southwestern Bank Graduate School at Southern Methodist University's Cox School of Business. He will have voting rights on the Federal Open Market Committee (FOMC) starting in 2025.

The news agency evaluated that the new president's emphasis on inflation suggests that he could become a representative hawk (favoring monetary tightening) at future FOMC meetings. His predecessor also had a hawkish stance.

Fed officials have recently drawn a line against the market's expectations for an early rate cut. Regarding the still high level of inflation, President Schmid said, "I think we have not yet emerged from the forest," and assessed that "the recent easing of inflation is thanks to the oil market reaching balance and supply chains recovering, which led to a decline in energy and commodity price inflation."

Additionally, in an interview with the Oklahoma City Economic Club, President Schmid said that for inflation in the service sector to evolve, wage growth needs to slow down and adjustments in the labor market are necessary. He emphasized the risks posed by the large asset portfolio and mentioned that he would not rush to stop the Fed's balance sheet reduction. He added, "After the crisis has passed, it should be a priority for the Fed to reduce the balance sheet and decrease its share in the financial markets."

This content was produced with the assistance of AI translation services.