The Kansas City Fed Chief explains the rate cut from easing inflation concerns
Jonathan Hoenig Fund Jonathan Hoenig discusses the changing impact of inflation on US finances and shares his unusual stock of the week at Varney & Co
This page The Federal Reserve It cut interest rates for the second time in 2025 last week, but one member of the Central Bank’s Monetary Committee voted against the rate cut, raising concerns about inflation.
Policymakers on the Federal Open Monetary Committee (FOMC), which oversees the Fed’s monetary policy, voted 10-2 in favor of lowering the benchmark Federal Feeds rate by 3.75% to 4% points. Another dissenter, Fed Governor Stephen Miran, called for a 50 basis point cut.
Another assrentimer was the Medral Reserve Bank of Kansas City President Jeffrey Schmid, who said in his statement “because the labor market” is very tight, the economy shows continued momentum, and inflation remains very high. “
Schmid said that in his conversations with contacts in the Kansas City Fed district he heard “widespread concern about continued costs and inflation.”
The Fed is cutting lending rates for the second time this year amid weakness in the labor market
Kansas City Fed president Jeffrey Schmid said he thinks monetary policy should be included in the rate hike given the economic stimulus. (Kent Nishimura/Bloomberg via Getty Images/Getty Images)
“The rise health costs And insurance premiums are mind-boggling. In detail, inflation is spread across sectors, both goods and services. “Inflation has been running above the Fed’s 2% target for more than four years,” he said.
The Kansas City Fed Chief said he thinks monetary policy has “only a modest margin” at this stage, noting that activity in markets and credit markets indicate that equity and lending policy suggests tightening or loosening.
In addition, Schmid said that the use was seen to accelerate in the summer, while capital investment – especially in software and – it has passed historical highs even though it sounds like bow prices.
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“With inflation still very high, monetary policy should be dependent on demand growth to allow room for emissions to expand and reduce economic pressure on the economy,” said Schmid.
“With a dual mandate, Congress has directed the Federal Reserve to manage trade-offs that come from an economic climate tied to unemployment,” Schmid said. “Constraints lead to difficult decisions to balance competing objectives.”
The Fed’s discretionary mandate is to promote stable rates in line with the 2% target of 2% and Great deal. Risks to both targets have emerged in recent months.
Inflation eased higher, with the Consumer Price Index (CPI) showing inflation rose to 3% in September from its strongest reading since January, while monthly jobs reports showed a marked slowdown in summer employment.
Inflation remained above the Fed’s target in September before the decision to cut the rate
Schmid said that in some cases, the Fed’s actions can have different effects on both sides of the economy two authority.
He noted for example that “I don’t think a 25-point reduction in the policy rate will do much to address the problems in the labor market that may arise from Demographics in Technology and Statistics.”
“However, the cut could have long-term effects on rising prices if the Fed’s commitment to its 2% reduction target meets. In the end, and as I estimate the strength of the Federal Reserve and the involvement of the policy rate,” said Schmid.
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