JACKSON, Wyoming (Reuters) -Kansas City Fed president Jeffrey Schmid said on Thursday there seems no rush to cut interest rates, with inflation still above the central bank’s 2% target and the labor market still in solid shape.
“I think we’re in a really good spot and I think we really have to have very definitive data to be moving that policy right now,” said Schmid, a voter on interest rate policy this year, said in a CNBC interview.
Schmid said that with inflation “probably closer to three than it is two,” the Fed needs to consider how reducing interest rates now might influence public expectations.
“That last mile is pretty hard,” Schmid said of the Fed’s aim of returning inflation to its 2% target after years of exceeding it. “I think we got to be careful about what lowering short-term rates would do to the inflation mentality.”
Schmid spoke ahead of the kickoff Thursday evening of an annual Fed research conference hosted by his regional bank, and as policymakers debate whether to reduce interest rates at an upcoming Sept. 16-17 policy meeting.
Fed Chair Jerome Powell addresses the conference on Friday.
The Fed held interest rates steady at its July meeting, but with two governors dissenting in favor of rate cuts and continued public calls for lower borrowing costs from President Donald Trump.
Schmid said despite recent weaker jobs data, he felt optimism building among his business contacts and did not think the current benchmark interest rate, set between 4.25% and 4.5%, was doing much to dampen the economy.
“I don’t know exactly what we are restricting,” Schmid said.
(Editing by Alex Richardson and Chizu Nomiyama)
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