Kansas City Fed’s Schmid wanted to hold rates steady this week on inflation concerns

Kansas City Federal Reserve president Jeff Schmid said Friday he preferred to hold interest rates steady at this week’s policy meeting because he’s more concerned inflation is “too high” than he is about the job market, which he sees as largely in balance.

“I do not think a 25-basis-point reduction in the policy rate will do much to address stresses in the labor market that more likely than not arise from structural changes in technology and demographics,” Schmid said in a statement. “However, a cut could have longer-lasting effects on inflation if the Fed’s commitment to its 2 percent inflation objective comes into question.”

Schmid reiterated what he’s said since the summer — that he believes with inflation still too high, interest rates should be held to keep demand down and relieve price pressures in the economy.

The Fed voted Wednesday to lower its benchmark interest rate by 25 basis points for a second meeting in a row. While Schmid dissented on a position of holding rates steady, Fed Governor Stephen Miran also dissented, preferring to cut rates by a jumbo 50 basis points.

Schmid noted in his statement that data shows inflation is spreading across categories, both goods and services, as prices have been running above the Fed’s 2% target for more than four years.

Talking to contacts in the Kansas City Fed’s district, Schmid said he hears widespread concern over continued cost increases and inflation. Rising healthcare costs and insurance premiums are top of mind, he said.

He also said he sees the economy showing continued momentum, pointing to consumer spending that picked up in July and August.

Schmid reiterated that he sees inflation expectations as a result of policy decisions the Fed makes, not as one the Fed reacts to maintain.

“I view the stance of policy as only modestly restrictive 1761914275,” said Schmid.

Jennifer Schonberger is a veteran financial journalist covering markets, the economy, and investing. At Yahoo Finance she covers the Federal Reserve, Congress, the White House, the Treasury, the SEC, the economy, cryptocurrencies, and the intersection of Washington policy with finance.