Fed’s Schmid: Politics do not enter Fed policy debates

Federal Reserve (Fed) President of the Bank of Kansas City Jeffrey Schmid said on Wednesday that the Fed system has layers of independence and that politics do not enter Fed policy debates. In an appearence before the Economic Club of Colorado, he added he believes the Fed’s independence leads to better decisions.

Key takeaways

Fed system has layers of independence.

Politics do not enter Fed policy debates, independence leads to better decisions.

Powell is a 'patriot' who wants to do the right thing for nation.

Every Fed chair has their own sense of how to run the FOMC.

Last year's FOMC dissents were not done lightly.

Appreciates that Warsh, if confirmed as Fed chair, would come with experience.

Never returning to Fed balance sheet size seen before financial crisis.

Main focus of Fed balance sheet debate is about size of reserves.

Concerned about duration of Fed balance sheet.

Fed mortgage holdings have lowered yields there.

It will take years for the Fed to run off mortgage bond holdings.

Fed Treasury bill reserve management buying is relatively modest.

We have work to do on inflation side of Fed mandate.

We are in a pretty good place for job market.

Fed attentive to but not preoccupied by the market.

Fed response to market trouble would depend on cause.”