Fed’s Schmid: Not out of high inflation yet, Fed should be patient on cuts

Kansas City Federal Reserve Bank
President Jeffrey

  • No need to preemptively adjust the stance of policy.
  • Fed should be patient, wait for convincing evidence that inflation fight has been won.
  • In ‘no hurry’ to halt the ongoing reduction in size of Fed’s balance sheet.
  • We are not out of the woods yet on ‘too high’ inflation.
  • How much further Fed can shrink its balance sheet ‘an open question’.
  • Don’t favor ‘overly cautious’ approach to balance sheet runoff; some interest-rate volatility should be tolerated.
  • Fed should minimize its footprint in the financial system, particularly as relates to Fed’s balance sheet.
  • Returning inflation to 2% will likely require restoring balance in labor markets, moderating wage growth.
  • Reducing Fed’s balance sheet should be a priority once crisis has passed.
  • Large Fed balance sheet can create unintended consequences, including on bank lending, liquidity.
  • January CPI inflation data argues for caution.
  • Large Fed balance sheet can create asset-price distortions.
  • Bank regulators should take tailored approach.

Headlines via Reuters

It seems like all the Fed officials are reading from a script. Key message is there is no hurry for the first rate cut.


  • Further disinflation ‘will need to come through services’ which
    continue to ‘rise briskly’
  • Fed must remain ‘narrowly focused’ on twin mandates; price stability is a ‘precondition’ for max jobs

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