The Federal Reserve cut interest rates for the second time in 2025 last week, though one member of the central bank's monetary policy committee voted against cutting rates, citing concerns over inflation.
Policymakers on the Federal Open Market Committee (FOMC), which guides the Fed's monetary policy, voted 10-2 in favor of lowering the benchmark federal funds rate by 25 basis points to a target range of 3.75% to 4%. One dissenter, Fed Governor Stephen Miran, called for a larger 50-basis-point cut.
The other dissenter was Federal Reserve Bank of Kansas City President Jeffrey Schmid, who said in a dissent statement that his "preference would have been to leave the target range unchanged" because the labor market is "largely in balance, the economy shows continued momentum, and inflation remains too high."
Schmid said that in his conversations with contacts in the Kansas City Fed's district he has heard "widespread concern over continued cost increases and inflation."
"Rising healthcare costs and insurance premiums are top of mind. In the data, inflation is spreading across categories, both goods and services. Inflation has been running above the Fed's 2% objective for more than four years," he said.
The Kansas City Fed chief said he thinks that monetary policy is "only modestly restrictive" at this stage, noting that activity in equity and lending markets suggests that policy isn't particularly tight or restrictive.
Furthermore, Schmid said that consumption appeared to accelerate through the summer, while capital investment – particularly in software and IT – has surged to historic highs despite being sensitive to interest rates.