The Federal Reserve "hawkish" warning: Need to see more data before cutting interest rates!

Kansas City Fed President Schmid emphasized that he would like to see more economic data before supporting any decision to start cutting interest rates.

In an interview on Wednesday, Schmid acknowledged that inflation is moving in the right direction and believed that the Fed should remain patient.

The Kansas City Fed President stated before the Jackson Hole central bank meeting, " I think it's important to see some data in the coming weeks. Before we take action, at least before I take action, or recommend taking action, I think we need to see a little more data."

Schmid's comments came after the release of the minutes from the Fed's July meeting. The minutes revealed that "several" Fed officials believed that the rate cut last month was justified, while "the vast majority" of officials believed that it would be appropriate to start cutting rates at the next meeting in September. It is worth noting that the Kansas City Fed President does not have voting rights this year.

Schmid stated, "I think that if we are not careful in our decision-making, we may still see a slight rebound in demand."

Since July 2023, the Fed has kept the benchmark interest rate at its highest level in over two decades. Signs of cooling inflation and pressure in the labor market have reinforced investor expectations that the Fed will cut rates by about 100 basis points in the last three policy meetings of 2024.

According to CPI data, core inflation, which excludes volatile food and energy categories, slowed for the fourth consecutive month in July. Meanwhile, the unemployment rate rose from a low of 3.4% last year to 4.3%.

Schmid also dismissed potential concerns in the market over the preliminary report on nonfarm employment and wages for the first quarter of 2024 released by the U.S. Bureau of Labor Statistics on Wednesday. The report indicated that annual employment growth as of March this year may have been overestimated by 818,000, suggesting that the labor market has been cooling and for a longer period than previously thought.

Schmid said, " While this is a significant number, it doesn't really change the way I think about monetary policy."