Federal Reserve October rate-cut dissenting members: Further rate cuts may intensify inflationary pressures.

On Friday local time, Kansas City Fed President Jeff Schmid said that further rate cuts might play a greater role in reinforcing high inflation than in supporting the labor market:

“I don’t think further rate cuts will do much to repair the cracks in the labor market—these pressures are more likely due to structural changes in technology and immigration policy. However, rate cuts could have a longer-lasting impact on inflation, as they may lead others to increasingly question our commitment to the 2% inflation target.”

Schmid made these remarks at the annual energy conference jointly hosted by the Kansas City Fed and the Dallas Fed. He stated that this reasoning is guiding his thoughts ahead of the upcoming December Fed policy meeting, though he added that he remains open to new information in the coming weeks.

At the FOMC meeting in October this year, Schmid voted against rate cuts, preferring to hold steady, and believes that a still robust economic growth could reignite inflationary pressures. He reiterated on Friday that current interest rates are only putting mild pressure on the economy, and he thinks such a degree of pressure is appropriate.

Fed policymakers chose to cut rates at the last two FOMC meetings to support the labor market, as hiring has slowed significantly in recent months. However, in recent days, several other Fed officials have also expressed hesitancy or opposition toward further rate cuts in December.

Schmid said that businesses in the Kansas City Fed’s district continue to express concern about inflation. He added that inflation seems to be more widespread than just tariffs-driven phenomena. “What’s concerning is not only tariffs, and maybe not even mainly tariffs. I hear complaints from businesses about rising healthcare and insurance costs, and there’s a lot of discussion about electricity costs.”

The Kansas City Fed President stated that although he supports policymakers’ decision to end balance sheet reduction, he again emphasized that in the longer term, he prefers the smallest, least-distorted balance sheet possible.

He also said the Fed could explore ways to offset the need for banks to hold reserves—a factor that boosts the balance sheet—including relaxing the conditions for using repo facilities (such as the standing repo facility), or lowering the interest rate paid on reserves.

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