Kansas City Fed's Schmid: Cutting rates could make inflation worse

Core Viewpoint - Kansas City Fed president Jeff Schmid believes inflation remains too high and that cutting interest rates could exacerbate inflation without significantly benefiting the job market [1][3]. Group 1: Economic Conditions - Schmid indicates that the economy is showing momentum, but inflation is still considered "too hot" [1]. - The neutral interest rate has increased, with the current range of 3.5% to 3.75% no longer being very restrictive [2]. - Although there are signs of moderating housing costs and rents, Schmid is cautious about reducing rates until there are more convincing signs of overall inflation decreasing [2]. Group 2: Inflation Concerns - The latest inflation data suggests an inflation rate close to 3%, which remains a significant concern for businesses in Schmid's district [2]. - Schmid expresses concern that cutting rates could lead to a departure from a low and stable inflation environment, affecting household and firm decision-making [3]. Group 3: Federal Reserve Actions - Schmid has dissented in the last two policy meetings regarding rate cuts, preferring to maintain rates to avoid igniting inflation [1]. - The Fed is expected to hold rates steady in the upcoming meeting on January 28, maintaining the current range of 3.5% to 3.75% [5]. - Fed governor Michael Barr stated that interest rates are currently in a good position and that more time is needed to assess the job market and inflation [5].