A senior member of the US Federal Reserve on Friday said he voted against cutting interest rates this week because inflation was “too high” for comfort.
Kansas City Fed president Jeff Schmid was one of two people who dissented on Wednesday’s vote, at which the US central bank backed a quarter percentage-point rate cut.
The other dissent was Fed governor Stephen Miran, who wanted a larger rate cut.
“The labor market is largely in balance, the economy shows continued momentum, and inflation remains too high,” Schmid said in a statement.
“I view the stance of policy as only modestly restrictive,” added Schmid, who has a vote on the Fed’s rate-setting committee this year. “In this context, I judged it appropriate to maintain the policy rate at this week’s meeting.”
US consumer inflation data came in hot at 3.0 percent in the 12 months to September, though the Fed uses a different measure that is also stuck above the two-percent target.
The Fed’s rate decision brought interest rates down to between 3.75 percent and 4.00 percent, easing the burden slightly on businesses and consumers looking to borrow money.
Speaking to reporters on Wednesday after the decision was published, Fed chair Jerome Powell said that while there had been broad agreement on a cut this time, there was less clarity on what would happen next.
“There were strongly differing views about how to proceed in December,” he said. “A further reduction in the policy rate at the December meeting is not a foregone conclusion, far from it.”
Speaking in Washington on Friday, President Donald Trump’s top economic advisor sounded a different note on the current health of the world’s largest economy, flagging the recent consumer inflation data which came in slightly below expectations.
“We’re glad that they reduced the interest rate,” Kevin Hassett, the director of Trump’s National Economic Council, told reporters.
“The Fed is flying blind a little bit, but we have a government shutdown, which is a negative for the economy,” he said.
“And against that backdrop, the idea that the Fed would be backing away from their promised rate reductions in the future is puzzling to us,” he added.
Futures traders slashed their expectations of a December rate cut following his remarks, and now see only a 63 percent probability of a quarter-point move in December, according to CME Group data.
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