NEW YORK: Federal Reserve (Fed) Bank of Kansas City president Jeff Schmid says the US central bank should wait to see how tariffs and other policies impact the economy before adjusting interest rates.
Schmid’s comments suggest he’s in no rush to lower borrowing costs, echoing what chair Jerome Powell told lawmakers earlier.
“With all this uncertainty, the current posture of monetary policy, which has been characterised as ‘wait-and-see’, is appropriate,” Schmid said in prepared remarks for an event in Omaha, Nebraska.
“The resilience of the economy gives us the time to observe how prices and the economy develop.”
Policymakers left rates unchanged for a fourth straight meeting when they gathered earlier this month.
Fed officials have been on the sidelines so far this year, after cutting rates by a full percentage point at the end of 2024, as they wait for incoming data to see how changes to trade, immigration and financial policy impact inflation and the labour market.
The Kansas City Fed president, who has been one of the Fed’s more cautious policymakers when it comes to inflation, praised the recent cooling in price pressures but noted that people’s not-too-distant experience with rapidly rising inflation could impact how tariffs feed into expectations for prices.
“Certainly, with the inflation of the past couple of years still in people’s minds, I will be carefully watching the monthly price data for signs of broad-based price increases that might further challenge an already fragile price-setting psychology,” Schmid said.
He underscored Fed policy should be forward-looking, and said it seems likely the Fed’s goals of price stability and maximum employment will come into conflict.
But he added that it’s unclear “when and by how much.” — Bloomberg
