Is the FED Ready to Cut Interest Rates? Critical Statements Came from a Hawkish FED Member!

Kansas City Fed President Jeffrey Schmid, who was appointed as a Fed member about a year ago and is known for his hawkish stance, spoke about interest rate cuts.

Speaking to Bloomberg TV at the Jackson Hole Symposium, Schmid said he wanted to see more economic data before supporting any decision to cut interest rates.

The FED member, who has stated that more patience is needed for interest rate cuts since his first speech, accepted that inflation is moving in the right direction but argued that the FED should be a little more patient for the cuts.

Schmid, who acknowledged that the latest data provided confidence that inflation was cooling and that the Fed was preparing the ground for a rate cut, said he wanted to see more data:

• We've seen some cooling in the labor market, but overall it remains pretty strong.
• I still strongly believe that the trend towards bringing inflation back to 2% on a sustainable basis is necessary.
• The unemployment rate is being examined more carefully.
• I would like to see more economic data before the rate cuts.
• The last two or three inflation data sets have been quite positive.
• It is desirable to take action before inflation reaches 2%, but a little more patience is required.
• The rates are not overly restrictive, there is still a long way to go to think about where we go from here.
• Because of the inflation shocks we have experienced in the past, we must consider the worst when evaluating the data.
• If inflation remains low, I will have greater confidence that we are making progress in our mission to achieve price stability, and I believe it will be appropriate to adjust our policy stance and interest rates.
• Frankly, I think we have a little more time to decide whether to cut interest rates.

Financial markets widely expect the Fed to lower its benchmark interest rate from the 5.25%-5.50% range it has held since July 2023. While a 25 basis point cut is priced into the market for September, there is also an expectation of a 50 basis point cut.

*This is not investment advice.