Fed's Schmid: Inflation is too high, economy shows momentum

Kansas City Fed President Schmidt dissented at last meeting, believes monetary policy is modestly restrictive and should remain there, intends to oppose additional cuts in December

Steve Liesman

Schmidt says cuts won't help labor market much but could have lasting effects on inflation and inflation expectations which he says are too high

Steve Liesman

Economy shows momentum with strong consumption and solid gains in capital spending, inflation above 3% and spreading across healthcare, insurance, electricity and other sectors

Steve Liesman

Concerned persistent inflation could become ingrained in people's psyches and force sharper rate increases down the road, policy should lean against demand growth to relieve pricing pressure

Steve Liesman

Labor market cooling but largely in balance, reflects structural more than cyclical changes, payroll break-even rate around 50,000

Steve Liesman

Hawkish Fed members don't see tight monetary policy indicators with equity markets at all-time highs, narrow corporate bond spreads, and robust high-yield issuance

Steve Liesman

Questions if Fed is making policy just for stock owners and tech companies investing in data centers, not reflective of entire economy

Go tell that to the 40-year-old first-time home buyer when they say policy isn't restrictive

Sarah

Fed has to make policy for aggregate economy with one tool, must react to overall GDP numbers even if only few sectors driving growth

Individual sector problems are more for fiscal policy, Fed can't target by sector

Carl

Interest rates control mortgage rates, auto borrowing rates showing stress, and affect consumer economy, part of mandate to address labor market weakness

Argument can be made on both sides which makes December meeting fascinating

Sarah

Powell faces 5-6 potential dissents for cuts, could have 4-5 dissents for cut and 3 if no cut, only hope is definitive economic data to create clear majority

Kashkari and Bostic also opposed October cut, creating difficult situation for Powell

Steve Liesman

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