Not out of high inflation, no need to preemptively cut rates

Kansas City Federal Reserve (Fed) Bank President Jeffrey Schmid said on Monday that the US central bank is in no rush to cut interest rates.

Key quotes

“No need to preemptively adjust the stance of policy.””

“Fed should be patient, wait for convincing evidence that inflation fight has been won.”

“In ‘no hurry’ to halt the ongoing reduction in size of Fed’s balance sheet.”

“We are not out of the woods yet on ‘too high’ inflation.”

“How much further Fed can shrink its balance sheet ‘an open question’.”

“Don’t favor ‘overly cautious’ approach to balance sheet runoff; some interest-rate volatility should be tolerated.”

“Fed should minimize its footprint in the financial system, particularly as relates to Fed’s balance sheet.”

“Returning inflation to 2% will likely require restoring balance in labor markets, moderating wage growth.”

“Reducing Fed’s balance sheet should be a priority once crisis has passed.”

“Large Fed balance sheet can create unintended consequences, including on bank lending, liquidity.”

“January CPI inflation data argues for caution.”

“Large Fed balance sheet can create asset-price distortions.”

“Bank regulators should take tailored approach.”

Market reaction 

The US Dollar Index (DXY) is trading higher 0.02% on the day at 103.78, as of writing.