Fed Hawk Schmid Warns Inflation Still Threatening Despite Economic Momentum

Jeffrey Schmid, president of the Federal Reserve Bank of Kansas City, voiced concern on Friday that inflation remains too high even though the U.S. economy still shows strength. He was one of two Fed officials who openly dissented from the central bank’s recent interest-rate cut. 

Schmid said he doubts that a 25 basis-point cut in the policy rate will meaningfully help the labour market, which he described as mostly balanced. Instead, he views any weakness as more likely the result of structural factors — such as demographics and technology — rather than a decline in demand. 

He pointed out that inflation has broadened across many categories, including healthcare and insurance, raising the risk that the Fed’s 2 % inflation target could come under serious doubt. Because of this, he said, policy needs to lean against demand growth rather than ease significantly. 

Despite his worries, Schmid acknowledged that business investment and consumer spending remain strong — clear signs the economy still has momentum. Accordingly, he described the current policy stance as only “modestly restrictive,” indicating that the Fed may not rush into further cuts. 

Schmid’s remarks draw attention to growing internal divisions at the Federal Open Market Committee ahead of its next meeting in December. With inflation elevated and economic signals mixed, the Fed faces a tough choice: support growth or guard against inflation.