Kansas City Fed President Cautions: "Clear Data Needed for September Rate Cut"

Jeffrey Schmid Stresses Caution on September Rate Cut
"Substantial Costs in Tackling the Final 1% of Inflation"

Jeffrey Schmid, President of the Federal Reserve Bank of Kansas City, expressed a cautious stance on a possible interest rate cut in September, stating on August 21 (local time), "We would need very clear data to adjust policy rates right now."

In an interview with CNBC's Squawk Box on the same day, President Schmid said, "We are really in a good position." He added, "We will sit around the table in September and work together to find a way," but also noted, "There will be a lot to discuss between now and September."

This draws a line against the market's expectation of a rate cut in September, suggesting that the decision should be made after reviewing key economic data such as the inflation and employment indicators for August.

He identified inflation as a major challenge. President Schmid pointed out, "The last stretch seems quite difficult," and noted, "There are real and substantial costs associated with tackling the last 1% of lingering inflation in the system." He continued, "Prices could rise," and said, "Current inflation is closer to 3% than 2%, and there is still work to be done."

He described the recent labor market as "solid."

This aligns with the minutes of the July Federal Open Market Committee (FOMC) meeting released the previous day. The minutes stated, "Participants emphasized both the risks of rising inflation and declining employment, but most judged the risk of higher inflation as greater," indicating that the committee members agreed it is still too early to cut rates.

Regarding former President Donald Trump's call for Fed Governor Lisa Cook to resign over allegations of obtaining a mortgage loan through false statements, President Schmid said, "As internal experts at the Fed, we have a responsibility," and added, "I believe she will handle the issue as needed."

On the White House's pressure on the Fed to lower rates, he commented, "Steel is tested in fire, so let's have a conversation." He emphasized, "What matters more is that the American people understand what the Fed is and what it does, and that they see value in our work."

Meanwhile, President Schmid, who holds a voting right on rate decisions at the FOMC, made these remarks a day before the Jackson Hole Symposium hosted by the Kansas City Fed. The market is closely watching Fed Chair Jerome Powell's Jackson Hole speech scheduled for the morning of August 22.