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Kansas Fed President Cautions Against Interest Rate Cuts

BY MT Newswires | ECONOMIC | 02/11/26 01:48 PM EST

01:48 PM EST, 02/11/2026 (MT Newswires) -- The Federal Reserve's monetary policy should remain "somewhat restrictive" to cool inflation, Kansas City Fed President Jeffrey Schmid said Wednesday, as he cautioned against cutting interest rates further.

The US economy entered 2026 with "solid" consumer demand amid an artificial intelligence buildout, according to Schmid. Overall demand looks set to remain strong as tax policy changes are likely to boost consumer spending, he said.

Late last month, the central bank left its benchmark lending rate steady, citing signs of stabilization in the unemployment rate as inflation remained elevated. The pause followed last year's three back-to-back 25-basis-point rate cuts amid concerns about the labor market.

"With demand outpacing supply and inflation running closer to 3% than 2%, I see it as appropriate to maintain a somewhat restrictive policy stance," Schmid said in remarks prepared for delivery at an economic forum in New Mexico. "Further rate cuts risk allowing high inflation to persist even longer."

The probability that the Fed will again keep rates steady at next month's policy meeting rose to 92% on Wednesday from about 80% the day before, according to the CME FedWatch tool. Official data showed that the US economy added more jobs than projected in January, while the unemployment rate slipped.

"Restrictive monetary policy can help slow demand growth, giving supply time to catch up and alleviate inflationary pressures," Schmid said. "With growth showing momentum and inflation still hot, I'm not seeing many indications of economic restraint."

On Tuesday, Dallas Fed President Lorie Logan said the current monetary policy is well positioned to respond to risks to inflation and the labor market, adding that she's more concerned about prices remaining "stubbornly high."

Separately, Cleveland Fed President Beth Hammack said Tuesday she expects that the central bank's benchmark lending rate could be on hold for "quite some time."

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.

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