Fed's Schmid Says 'Wait-and-See' Approach Right For Rate Policy As Tariff Fallout Still Unclear

Kansas City Federal Reserve President Jeff Schmid said on Tuesday that the central bank has sufficient time to analyze rising import tariff impacts on inflation and economic growth before implementing further interest rate cuts.

What Happened: “The current posture of monetary policy, which has been characterized as ‘wait-and-see,’ is appropriate,” Schmid stated in prepared remarks to an agricultural summit in Nebraska, Reuters reported.

The Kansas City Fed chief, who holds a voting seat on the Federal Open Market Committee this year, emphasized that economic resilience provides the Fed time to observe price and economic developments before adjusting the benchmark policy rate.

The Fed has maintained its target rate between 4.25% and 4.5% since December despite pressure from President Donald Trump for rate cuts. The FOMC next convenes July 29-30, with current Fed projections anticipating two rate reductions by year-end.

Why It Matters: Schmid highlighted growing uncertainty around trade policy, with Fed officials generally expecting slower growth, higher unemployment, and elevated inflation in the coming months. Inflation remains above the Fed’s 2% target, with “contacts almost uniformly expecting increased tariffs to push up prices and weigh on activity,” he noted.

Fed Chair Jerome Powell recently attributed rising core inflation forecasts to expected tariff effects, with projections increasing from 2.8% in March to 3.1% currently. The Personal Consumption Expenditures inflation measure is projected to reach 3.0% in 2025, while real GDP growth was downgraded to 1.4% from 1.7%.

The S&P 500, tracked by SPDR S&P 500 ETF Trust SPY and Nasdaq-100, tracked by Invesco QQQ Trust ETF QQQ, declined following the Fed announcement last week.

Photo Courtesy: Andrii Yalanskyi on Shutterstock.com

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