By Matt Grossman

Kansas City Fed President Jeffrey Schmid reaffirmed his resistance to further interest-rate cuts, arguing that further Fed easing would risk allowing inflation to remain too high.

Speaking to a business audience in Albuquerque, N.M., Wednesday morning, Schmid said that the economy is entering 2026 on strong footing, and cited persistent inflation as a signal that demand may be outpacing supply. He said he is optimistic that artificial intelligence may boost economic growth without generating price increases, but cautioned that it's too early for the Fed to relax its anti-inflation stance.

"In my view, further rate cuts risk allowing high inflation to persist even longer," Schmid said, according to a published text of his remarks. "We must remain focused on our headline inflation objective, otherwise I believe there is a real risk that inflation will get stuck closer to 3% than 2% in the long run," he added.

Schmid, one of the most hawkish members of last year's Federal Open Market Committee, zeroed in on a debate about whether the Trump administration's steep tariffs are likely to cause persistent inflation, or merely a one-time price shock. Rather than arguing whether tariffs will cause persistent or transitory inflation, Schmid suggested, the Fed should recognize that distinction is determined by its own actions.

"It is the actions of monetary policy that determine whether a price shock is transitory or not," he said.

Last year, Schmid dissented against two of the three rate cuts that officials voted through between September and December, easing that brought the Fed's interest-rate target down to a range between 3.5% to 3.75%. Under the system that rotates policy votes among the Fed's 12 regional reserve-bank presidents, Schmid doesn't have a say on monetary policy this year. But he has allies in hawkish 2026 voters such as Cleveland Fed President Beth Hammack and Dallas Fed President Lorie Logan, both of whom argued in speeches on Tuesday that further cuts are unwarranted.

A strong January jobs report out Wednesday morning bolstered their case, showing that net hiring last month blew past economists' expectations. With those numbers in hand, now traders barely see any probability that the Fed will consider a March rate cut, as reflected in their bets in interest-rate futures markets.

Write to Matt Grossman at matt.grossman@wsj.com

(END) Dow Jones Newswires

February 11, 2026 10:10 ET (15:10 GMT)

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