As the Fed enters 2025, in a strong economy with inflation still running above its 2% target, Kansas City Fed President Schmid, a voting member of the Federal Open Market Committee (FOMC), made statements indicating a cautious approach to monetary policy adjustments. Speaking today at the Kansas City Economic Club, Schmid said interest rates may be approaching their long-run equilibrium. “We are now very close to achieving the dual goals of price stability and full employment,” Schmid said. He noted that inflation is gradually moving toward the Fed’s goal, economic growth continues to accelerate and the labor market remains healthy, albeit weakened. “With inflation running close to target and economic growth continuing to strengthen, I believe we are approaching a turning point where the economy requires neither restraint nor support, and policy should be neutral,” Schmid added. “Interest rates are likely to remain very close to long-term levels,” he said, signaling support for maintaining current rates. “I support gradual adjustments to policy and will only respond if data trends indicate a significant shift,” Schmid said, signaling a data-driven approach to future rate cuts. Schmid also voiced optimism about the continued easing of inflationary pressures and economic growth, while calling for further reductions in the Fed’s balance sheet. Schmid reiterated the Fed’s long-term goal of holding only U.S. Treasuries in its portfolio. Related News: New Administration in the US Announces a New Critical Appointment for Cryptocurrencies - Here are the Opinions of the New Official Fed member Michelle Bowman also struck a cautious tone but focused on the challenges of inflation and policy adjustments. Bowman called the December rate cut the “final step” in the Fed’s policy realignment, but suggested it may not have been necessary given the resilience of the economy and the lack of significant progress in inflation. “We need to be cautious in considering adjustments to policy rates,” Bowman said, advocating a measured, data-driven approach that would be important to avoid biased policy actions under the new administration. Bowman warned that upside risks to inflation remained and noted that the economic recovery was stalling in some areas. “Inflation levels remain elevated and the coming months will provide a clearer understanding of the new administration’s policies and their impact on inflationary pressures,” he said. *This is not investment advice. Continue Reading: JUST IN: Two Senior Fed Officials Make Critical Statements on Interest Rates
