NextFin news, Federal Reserve Bank of Kansas City President Jeff Schmid said on Thursday, September 25, 2025, in Kansas City that the US central bank’s monetary policy is currently in the right place to reduce inflation, even as the labor market shows signs of slowing but remains largely balanced.
Speaking at a Mid-Sized Bank Coalition of America event, Schmid supported the Federal Open Market Committee’s recent 25 basis point interest rate cut, describing it as a precautionary measure in response to labor market risks. However, he emphasized that inflation, running around 2.5%, remains above the Fed’s 2% target, and the job market is still relatively stable.
"I view the current stance of policy as only slightly restrictive, which I think is the right place to be," Schmid said. He noted that monetary policy must be forward-looking, considering the delayed effects of rate changes on the economy.
Schmid’s comments contrast with concerns from other Fed officials, such as Vice Chair for Supervision Michelle Bowman, who recently warned of deteriorating labor market conditions that might require faster and larger rate cuts. Meanwhile, Fed Chair Jerome Powell described the policy stance as "modestly restrictive" and did not indicate plans for further rate cuts.
In addition to monetary policy, Schmid highlighted the importance of the Fed’s role in banking supervision, warning against political efforts to reduce the central bank’s supervisory responsibilities. He said, "Congress has tasked the Fed with protecting the health of the financial system, and in turn the economic health of the nation," emphasizing the interconnectedness of supervision, monetary policy, liquidity provisioning, and payment system robustness.
Schmid’s position reflects a cautious approach to balancing inflation control with labor market stability, signaling that while some easing has occurred, the Fed remains vigilant in its dual mandate to promote maximum employment and price stability.
Explore more exclusive insights at nextfin.ai.