MNI: Fed's Schmid Supports Rate Cut If Inflation Stays Low

Federal Reserve Bank of Kansas City President Jeff Schmid said Thursday he's growing more confident that inflation is on a path to 2% and signaled his support for lowering interest rates if progress continues.

"If inflation continues to come in low, my confidence will grow that we are on track to meet the price stability part of our mandate, and it will be appropriate to adjust the stance of policy," Schmid said in remarks prepared for the Kansas Bankers Association's annual meeting in Colorado Springs, Colorado.

Meanwhile, a dashboard of more than two dozen indicators show the U.S. labor market to be cooling but still healthy, and that appears to match sentiment among local businesses, Schmid said.

The KC Labor Market Conditions Indicator looks at 26 indicators and "the labor market still appears to be quite strong by this measure," he said. "This aligns with my discussions with district contacts, which generally acknowledge a cooling of the market but not a sense of widespread disruptions or declines." (See: MNI INTERVIEW: Fed To Wait For Sept Despite Jitters-Stein)

A looser labor market is needed to bring inflation down, but "this story could change if conditions were to weaken considerably more," he said.

Other economic indicators also point to strength, including GDP growth and anecdotal evidence from businesses, he said.