Kansas City Federal Reserve President Jeffrey Schmid pushed back against calls for interest rate reductions, arguing tight monetary policy remains necessary amid persistent inflation. Speaking in Albuquerque, Schmid noted 3% inflation persists as strong demand continues to outstrip supply growth across multiple sectors of the economy.

Schmid dismissed hopes that productivity gains or AI breakthroughs could quickly ease price pressures. He attributed recent efficiency improvements to reduced labor market turnover rather than technological advances, citing a "low-hire, low-fire" environment that may not sustain productivity growth. The Fed official warned cutting rates too soon could entrench inflationary pressures, particularly with economic expansion continuing above trend levels.

Schmid’s hawkish stance contrasts with Trump administration officials and Fed chief nominee Kevin Warsh, who point to productivity data as justification for easing. The Fed held rates steady at its last meeting, with markets expecting no changes before June’s policy decision. Friday’s upcoming inflation report could test Schmid’s arguments against premature easing.