Kansas City Fed President Discusses Interest Rates

Kansas City Fed President Jeffrey Schmid emphasized the uncertainty surrounding future interest rate reductions, despite recent cuts reflecting growing confidence in inflation's moderation towards the Fed's 2% target. He noted improvements in labor and product markets but cautioned that it remains to be seen how much further rates can decline. Schmid highlighted the potential for persistently higher interest rates due to large fiscal deficits, stressing the importance of Fed independence in monetary policy to avoid political pressures that could lead to inflation. He also mentioned that the ongoing inflation fight is not yet over, with demographic and productivity shifts potentially altering inflation dynamics in the long run. As Schmid prepares for his voting role next year, he underscored a cautious approach to monetary policy to ensure market stability. His remarks come at a time when the markets are responding positively, particularly with gains in major indices like the NASDAQ.