Fed official calls for sticking to tight monetary policy

The limited impact of tariffs on inflation should not be seen as a reason to cut interest rates, but rather as evidence that the current monetary policy stance remains appropriate, Jeffrey Schmid, President of Federal Reserve Bank of Kansas City said.

Speaking at a conference in Oklahoma today, Aug. 12, Schmid noted that the economy’s ongoing momentum, rising business confidence, and inflation staying above target justify maintaining a moderately restrictive monetary policy for now.

He added that the current interest rate is close to the neutral level—one that neither stimulates nor restrains economic activity—highlighting that the labor market remains strong despite a noticeable slowdown in job growth in recent months.

Schmid concluded that economic growth remains solid and inflation is still elevated, warranting a restrictive policy stance. However, he said he would reconsider his position if there were clear signs of a significant weakening in demand.