Fed’s Schmid: If inflation data keeps coming in low, appropriate to lower rates

Kansas City Federal Reserve Bank President Jeffrey Schmid, speaking with the Kansas Bankers Association’s annual meeting in
Colorado Springs,
Colorado:

  • If inflation continues to come in low, it will be appropriate to adjust policy.
  • Current stance of Fed policy is ‘not that restrictive.’
  • Financial conditions can impact real economy, but Fed must remain focused on dual mandate.
  • Fed is close but ‘still not quite there’ on reaching 2% inflation goal.
  • More confident that inflation is on path to target, given recent ‘encouraging’ inflation data.
  • Price data is volatile, should look for the worst in the data rather than the best.
  • Has been ‘noticeable cooling’ of labor market, but overall it still appears healthy.
  • Cooling labor market is a necessary condition for easing inflation.
  • The story could change if conditions were to weaken considerably.
  • Path of Fed policy will be determined by data, and strength of economy.
  • Would not want to assume any particular path or endpoint for policy rate.

Schmid favours a more hawkish outlook than many of his colleagues, but he sounds middle-of-the-road here.

He is highlighting the next data point coming, CPI next week:

This article was written by Eamonn Sheridan at www.forexlive.com. Source