Fed's Schmid: Interest rates appropriately adjusted, should focus on inflation risks

According to sources, Kansas City Fed President Schmid stated on Monday that he is inclined not to further cut interest rates, emphasizing the need to continue monitoring the risk of high inflation when the Fed seeks to balance between policy being too tight or too loose. Schmid supported the Fed's decision to cut rates by 25 basis points in September, calling it appropriate risk management against a cooling labor market backdrop. However, he pointed out that various indicators show the overall job market remains healthy, while inflation remains high, with service sector inflation stable at around 3.5% in recent months, well above the Fed's 2% inflation target. A concerning sign is the widening scope of price increases, Schmid noted, pointing out that as of August, nearly 80% of categories in official inflation statistics saw price increases, up from 70% at the beginning of the year. He added: 'Overall, I expect the impact of tariffs on inflation to be relatively mild, but I believe this indicates that policy has been appropriately calibrated, rather than suggesting a significant cut in policy rates is warranted.'

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