Inflation Still Too High — Fed's Jeff Schmid Explains His Vote Not to Cut Rates This Week

💡 DMK Insight

The Kansas City Fed President’s comments on structural changes in the labor market are a wake-up call for traders: lower rates might not be the panacea many hope for. This perspective shifts the focus from traditional monetary policy tools to the underlying issues affecting employment. If rates remain low without significant labor market improvements, we could see a divergence in asset performance, particularly in sectors sensitive to interest rates like real estate and consumer discretionary. Traders should keep an eye on economic indicators such as job growth and wage inflation to gauge the real impact of these structural changes. If the labor market doesn’t respond, we might see increased volatility in equities and a potential flight to safety in bonds. On the flip side, if the Fed continues to signal a dovish stance despite these structural challenges, it could lead to a short-term rally in risk assets. So, watch for any shifts in Fed communications or economic data releases that could impact market sentiment. Key levels to monitor include support and resistance in major indices, as well as any shifts in bond yields that could signal changing investor sentiment.