Rate cut necessary to support US labor market: Fed’s Schmid

Federal Reserve Bank of Kansas City President Jeffrey Schmid said on Thursday that the central bank’s interest rate cut last week was necessary to help maintain a healthy job market, despite persistent inflationary risks.

Speaking at a gathering of the Mid-Sized Bank Coalition of America in Dallas, Schmid noted that while the economy is currently in a good position regarding the Fed’s inflation and employment goals, recent data indicates increasing risks of a more substantial or abrupt weakening in the labor market than previously anticipated.

“I viewed the 25-basis-point cut in the policy rate last week as a reasonable risk-management strategy as the Fed balances its inflation objective with some heightened concern over the health of the labor market,” Schmid said in his prepared remarks.

However, Schmid emphasized that inflation remains elevated, while the labor market remains balanced despite signs of a slowdown. Keeping monetary policy slightly accommodative is the most appropriate option at this stage, he added.