Fed Should Stay Put as Inflation Remains 'Too High', Kansas Fed President Says

01:51 PM EDT, 08/12/2025 (MT Newswires) -- The US central bank should maintain its monetary policy for now as inflation remains "too high," Kansas City Federal Reserve Bank President Jeffrey Schmid said Tuesday, voicing disagreement with policymakers calling for interest rate cuts.

Schmid said that while President Donald Trump's reciprocal tariffs seem to be having limited effects on prices, their eventual impact on inflation "is almost impossible to anticipate." Schmid is a voter on the Federal Open Market Committee this year.

"Overall, I am anticipating a relatively muted effect of tariffs on inflation, but I view that as a sign that policy is appropriately calibrated rather than a sign that the policy rate should be cut," he said in remarks prepared for delivery at a conference in Oklahoma.

The current inflation level remains "too high," he said, citing the personal consumption expenditures price index accelerating to 2.6% in June, above the Fed's 2% inflation objective.

The consumer price index held steady at 2.7% growth on an annual basis in July, while the core rate jumped to 3.1% from 2.9% in June, the Bureau of Labor Statistics reported Tuesday.

Fed governors Michelle Bowman and Christopher Waller, who opposed the FOMC's July decision to hold rates steady, recently said that a policy adjustment was required to avoid a potential deterioration in the labor market. Data showed on Aug. 1 that the world's largest economy added fewer jobs than projected in July, while gains in the previous two months were revised sharply lower.

"The labor market, while cooling, remains in good health," Schmid said.

At the FOMC's July meeting, both Bowman and Waller preferred a 25-basis-point reduction in its benchmark lending rate. During a press conference after the meeting, Fed Chair Jerome Powell remained noncommittal regarding potential policy easing. Trump has repeatedly criticized Powell over his wait-and-see stance.

"With the economy still showing momentum, growing business optimism, and inflation still stuck above our objective, retaining a modestly restrictive monetary policy stance remains appropriate for the time being," Schmid said.

Markets widely expect the Fed to cut interest rates in September, according to the CME FedWatch tool.

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