Fed's Schmid: Monetary policy should lean against demand growth with inflation too high

Federal Reserve Policy & Dissent - Two Fed members dissented on the recent rate cut decision: Governor Myron favored a 05% cut, while Kansas City Fed President Schmidt preferred no change [1] - Schmidt dissented because he didn't see policy as restrictive and was concerned about inflation exceeding the Fed's 2% target [2] - Dallas Fed President Logan, a non-voting member, shared a hawkish view, suggesting it would be difficult to support another rate cut in December unless inflation falls faster or the labor market cools more than forecast [2][4] - The comments reveal resistance within the Fed regarding rate cuts, prompting Powell to caution that a December cut is not guaranteed [5] Economic Indicators & Market Conditions - Schmidt believes the labor market is imbalanced and the economy shows momentum, with inflation spreading across goods and services [3] - He noted easy financial market conditions, including record high equities and narrow bond spreads [3] - Logan believes inflation is taking too long to return to the 2% target, and stock market gains are fueling wealthier household demand [4][5] - The economy accelerated through the summer, according to Schmidt [4] Future Policy Outlook & Data Dependence - The market still anticipates a December rate cut with a 68% probability, despite the Fed's divided stance [7] - The focus is shifting to determining the Fed's default position: whether the economy must prove the need for a cut, or prove that a cut is not needed [10] - Future policy decisions will likely depend on jobs data, including alternative jobless claims reports and weekly ADP data [11][12]