(Reuters) -Kansas City Federal Reserve President Jeffrey Schmid on Friday said his concerns about “too hot” inflation go well beyond the narrow effects of tariffs alone, in fresh remarks that signaled he could dissent again at the Fed’s December meeting should policymakers opt to cut short-term borrowing costs again.
Schmid was one of two dissenters on the Fed’s October decision to lower the policy rate by a quarter of a percentage point to the 3.75%-4.00% range.
On Friday he reiterated that he feels the cooling seen in the U.S. job market is due to structural changes not amenable to support from lower interest rates, and his worry that rate cuts could undercut the Fed’s 2% inflation goal.
“This was my rationale for dissenting against the rate cut at the last meeting and one that continues to guide my thoughts as I head into the meeting in December,” Schmid told an energy conference co-hosted by the Dallas and Kansas City Fed banks in Denver, while adding that his decision at the meeting will be informed by data gathered in coming weeks.
“I view the current stance of monetary policy as being only modestly restrictive, which is about where I think it should be.”
Several other policymakers have in the weeks since the October decision voiced similar concerns about inflation and the potential that easing policy further could allow price pressures to accelerate, even as most like Schmid say they don’t think that tariffs per se are the main problem.
Their growing concerns, up against the other policymakers who feel the labor market could deteriorate sharply if rates are not cut, suggest the decision at the December 9-10 meeting will be a hotly contested one around the Fed policymaking table.
“Though tariffs are likely contributing to higher prices, my concerns are much broader than tariffs alone,” Schmid said, noting uncertainty about when and by how much businesses will pass on their higher costs to consumers.
The Fed also has “no room to be complacent” on inflation expectations, he said.
“History has shown us that persistent inflation can shift the psychology around price-setting, and inflation can become ingrained,” Schmid said. “It is unlikely that we will still be talking about soft landings in that situation.”
(Reporting by Ann Saphir; Editing by Andrea Ricci)
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