Fed’s Schmid unsure of December cut, says policy where ’it should be’

Investing.com -- Kansas City Federal Reserve President Jeffrey Schmid indicated Friday that he might dissent again at the Fed’s December meeting if policymakers decide to cut interest rates further, citing persistent inflation concerns that extend beyond tariff impacts.

Schmid was one of two officials who opposed the Fed’s October decision to lower the policy rate by a quarter percentage point to the 3.75%-4.00% range. In his remarks at an energy conference in Denver co-hosted by the Dallas and Kansas City Fed banks, he explained his position.

"I view the current stance of monetary policy as being only modestly restrictive, which is about where I think it should be," Schmid said, reiterating his belief that cooling in the U.S. job market stems from structural changes that lower interest rates cannot address.

The Kansas City Fed president expressed concern that additional rate cuts could undermine the Fed’s 2% inflation target. "This was my rationale for dissenting against the rate cut at the last meeting and one that continues to guide my thoughts as I head into the meeting in December," he stated, while noting his final decision would depend on upcoming economic data.

Schmid emphasized that his inflation worries go beyond tariffs. "Though tariffs are likely contributing to higher prices, my concerns are much broader than tariffs alone," he said, pointing to uncertainty about when and how businesses will pass higher costs to consumers.

Several Fed policymakers have voiced similar inflation concerns since the October meeting, creating tension with those who fear the labor market could deteriorate without further rate cuts. This division suggests the December 9-10 meeting will involve intense debate.

Schmid also warned about inflation expectations, saying the Fed has "no room to be complacent" and that "persistent inflation can shift the psychology around price-setting, and inflation can become ingrained." He cautioned, "It is unlikely that we will still be talking about soft landings in that situation."