Kansas City Fed President Jeff Schmid says the fight against inflation is not finished. Speaking at a banking conference on May 14, he called persistent inflation the biggest risk to the US economy.
Inflation is stuck around 3%, above the Fed's 2% target. Schmid wants to keep interest rates high. He dissented against rate cuts in December and October 2025, warning that easing too soon could embed inflation in the economy.
Schmid points to a strong economy and balanced labor market. Service-sector inflation remains stubborn, driven by wages and structural costs. Cutting rates now, he argues, would fuel inflation again.
This puts him at odds with markets expecting rate cuts in 2026. The gap from 3% to 2% has historically been the hardest to close. Schmid wants to avoid the mistake of the 1970s, when premature easing let inflation become entrenched.
For crypto markets, a hawkish Fed means less capital for speculative assets. Higher rates make bonds more attractive. DeFi strategies and altcoins are likely to feel the most pressure.
Schmid's message is clear: inflation is too high, the economy can handle tight policy, and easing too soon would be a mistake.