Kansas City Fed President Schmid on Inflation, Labor Market, and Fed Independence

Inflation and the "Last Mile"

• 🎯 The Kansas City Fed President, Jeffrey Schmid, believes the "last mile" of inflation reduction is proving to be quite difficult.
• 📈 He suggests that the current inflation rate is likely closer to three percent than two percent, indicating more work is needed to reach the Fed's target.
• ⚠️ Schmid acknowledges the potential for inflation to tick up before it continues its downward trend.

Labor Market Strength and Immigration

• 📊 Schmid describes the labor market as solid, with supply and demand appearing to be in balance.
• 💬 He notes increased optimism among businesses for the latter half of the year, aligning with Chair Powell's observations.
• 🧩 Changes in immigration policies are likely influencing labor data, with a noted decline in numbers from the previous year.

Fed Independence and Political Pressure

• 🏛️ Schmid emphasizes the importance of the Federal Reserve's independence and its interaction with all three branches of government, stating it's "tested by fire."
• 🗣️ He believes it's crucial for the American public to understand the Fed's role and value proposition.
• 🧐 Regarding allegations against Fed Governor Lisa Cook, Schmid stated she will handle matters as needed, acknowledging the seriousness of the application process for mortgages.

Interest Rate Outlook

• 📉 Markets are anticipating a Fed rate cut in September, but Schmid suggests there is significant data to be reviewed before any definitive move.
• 🧐 He is not in a hurry to cut interest rates and is actively looking for signs of restrictiveness in the economy, but has not yet identified them.
• 🤝 Schmid indicated that decisions on policy rates will be made collaboratively after reviewing all available data between now and the September meeting.