Kansas City Federal Reserve President Jeff Schmid expressed reluctance to further cut interest rates, citing a resilient U.S. economy and inflation hovering above the Fed's 2% target. Schmid believes the economy is near a state of equilibrium, requiring neither restrictive nor supportive policies. He favors gradual policy adjustments only in response to sustained data changes and emphasizes the strength of the economy allowing for patience. The Fed last month lowered its benchmark rate by a quarter percentage point and signaled fewer rate cuts in 2025 than previously projected.
NEW YORK, Jan 9 - Kansas City Fed eral Reserve President Jeff Schmid signaled on Thursday a reluctance to cut interest rates again as the U.S. central bank comes into the new year facing a resilient economy and inflation that remains above its 2% target.
In the current environment,"interest rates might be very close to their longer-run level now," Schmid said."I am in favor of adjusting policy gradually going forward and only in response to a sustained change in the tone of the data," he said, adding that"the strength of the economy allows us to be patient."
The Kansas City Fed chief weighed in on the central bank balance sheet drawdown known as quantitative tightening, or QT, which has seen the Fed reduce its holdings from a peak of about $9 trillion in 2022 to just under $7 trillion. The Fed expects to reduce its holdings further but is unsure how far it can take the process.
FED INTEREST RATES INFLATION ECONOMY QUANTITATIVE TIGHTENING
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