Federal Reserve officials for this year and next have all spoken out: concerned about inflation, opposed to a rate cut in December

On Friday local time, the Kansas City Federal Reserve and the Dallas Federal Reserve jointly held their annual energy conference. This year's voting committee members, Kansas City Fed President Jeff Schmid and next year's voting committee member Dallas Fed President Lorie Logan, both expressed or implied opposition to a rate cut in December.

October Voting Committee Members Opposing Rate Cuts: Further Rate Cuts May Intensify Inflationary Pressures

Kansas City Fed President Jeff Schmid stated that further rate cuts may have a greater role in reinforcing high inflation than in supporting the labor market:

"I believe that further rate cuts will not play a significant role in mending the cracks in the labor market—these pressures are more likely to stem from structural changes in technology and immigration policy. However, rate cuts could have a more lasting impact on inflation, as they would increasingly raise doubts about our commitment to the 2% inflation target."

He indicated that this reasoning is guiding his thoughts on the upcoming December Federal Reserve policy meeting, although he added that he remains open to new information in the coming weeks.

Schmid opposed a rate cut vote at the FOMC meeting in October, leaning towards maintaining the current rates, and believes that still strong economic growth could reignite inflationary pressures. He reiterated on Friday that current interest rates are only exerting moderate pressure on the economy, which he considers appropriate.

Federal Reserve policymakers have chosen to cut rates in the last two FOMC meetings to support the labor market, as hiring has significantly slowed in recent months. However, in recent days, several other Fed officials have also expressed hesitation or opposition to another rate cut in December.

Schmid noted that businesses in the Kansas City Fed district continue to express concerns about inflation. He added that inflation seems to be more widespread than merely driven by tariffs. "What is concerning is not just tariffs, and not even primarily tariffs. I hear businesses worrying about rising healthcare costs and insurance premiums, and there are many discussions about electricity costs."

The Kansas City Fed President stated that while he supports the decision to end the balance sheet reduction, he again emphasized that in the long term, he prefers a balance sheet that is as small and least distorted as possible.

He also mentioned that the Fed could explore ways to offset the demand for reserves from banks, which is a factor pushing up the balance sheet, including relaxing the conditions for using repurchase facilities (such as the standing repo facility) or lowering the interest rate paid on reserves.

Dallas Fed President: Opposes Rate Cuts in December

Dallas Fed President Lorie Logan reiterated on Friday that she will oppose a rate cut in December. She also opposed a rate cut in October, citing concerns about high inflation levels, which are on the rise, and the lengthy time required to return to the Fed's 2% target:

"Regarding the December meeting, unless we receive compelling evidence that inflation is indeed declining faster than I expect, or the labor market is cooling more than we currently see, I find it difficult to support another rate cut.

Until I see clear evidence that we are on the path to inflation fully returning to the 2% target, I do believe that maintaining a slightly restrictive policy is appropriate." Logan stated that the U.S. labor market is cooling down, but this is gradual and moderate, which aligns with the Federal Reserve's goals, as the Fed needs to lower inflation and maintain sufficiently high short-term borrowing costs to exert a certain "braking" effect on the economy.

Logan supports the Fed's rate cut in September as a form of "insurance" to prevent further deterioration of the labor market, but in her view, the current labor market does not require any additional preemptive insurance-style rate cuts. On the contrary, she indicated that the Fed can continue to monitor labor market risks, "If we see a cooling that exceeds a gradual level, then I think another rate cut would be worth considering."

Logan will not have voting rights on the FOMC's monetary policy until next year, but non-voting members also participate in policy discussions and can influence the direction of decisions