Kansas City Fed president Jeffrey Schmid said on Thursday the August jobs report due out Sept. 5 will be “very consequential” in shaping the central bank’s next move.
“I think the data coming between now and the September meeting is going to be very consequential,” Schmid told Yahoo Finance from the Jackson Hole Economic Symposium.
“So if we do see patterns and [a] risk to the labor market itself, I think we’ll start to consider and weigh the inflation data to the labor data.”
Schmid described Fed’s current monetary policy stance as “modestly restrictive.”
For four years, inflation has persistently been above the Fed’s 2% target, and recent data suggests it might now be rising further. At the same time, growing evidence indicates a weakening labor market, with the July jobs report pushing markets to anticipate that the Fed will begin cutting rates next month.
The Fed kept interest rates unchanged in a range of 4.25%-4.50% on July 31.
Read more: How jobs, inflation, and the Fed are all related
Schmid’s comments on Thursday suggested risks on the Fed’s mandate remain more tilted toward inflation remaining too high rather than the labor market softening aggressively.
With investors all but certain the Fed will cut rates in the coming weeks — and with pressures building on the Fed politically to begin a rate-cutting cycle — this view appears to put Schmid among a dwindling number of Fed officials still focused on inflation pressures.
“I think we’re seeing and hearing, more importantly, in the [Kansas City Fed’s] district, that some [of] the risk of [inflation] is higher than maybe seeing some of the labor numbers come back into line,” Schmid said.
Last week’s Consumer Price Index (CPI) report showed that while headline inflation was lower than consensus forecasts, on a “core” basis prices rose more than expected. The Producer Price Index (PPI), a read on wholesale prices, also showed inflation pressures building.
The July jobs report showed hiring slowed last month, while over 250,000 job additions were revised away from the May and June data.
“We have a lot of things in balance right now in the economy, in my opinion,” Schmid said.
“And I’m just trying to be very careful to [not] try and do too much. That will create an imbalance.”
Fed Chair Jay Powell is set to speak in Jackson Hole on Friday in what is expected to be his signature policy speech of the year and his last at the symposium as Fed chair.
Jennifer Schonberger is a veteran financial journalist covering markets, the economy, and investing. At Yahoo Finance she covers the Federal Reserve, Congress, the White House, the Treasury, the SEC, the economy, cryptocurrencies, and the intersection of Washington policy with finance. Follow her on X @Jenniferisms and on Instagram.
