Fed's Schmid agrees with Warsh on AI-driven capital demand and growth
Schmid says geopolitical strain, not Fed policy, is pushing bond yields higher
Published
Chart: US10Y, US 10-year Treasury yield, one-minute prices, three sessions
Kansas City Fed President Jeffrey Schmid says he agrees with Fed Chair Kevin Warsh that artificial intelligence investment is driving both economic growth and demand for capital. Schmid also said geopolitical challenges, rather than Fed policy, are behind the recent rise in bond yields.
The comment comes days after the Fed raised its target rate range to 3.75% to 4% on Wednesday and signaled one more increase this year. Schmid has separately said the labor market looks balanced even as inflation data he has pointed to run above 3%. Standard Chartered has dropped its call for no further move this year and now expects the Fed to raise rates again in December.
Warsh, who has voted for higher rates and resisted calls to cut, has faced pressure from the White House. President Trump has said he still has confidence in Warsh as Fed Chair, even as he pushes for lower rates.
Schmid's agreement with Warsh on growth and capital demand from AI investment, paired with his view that geopolitics rather than the Fed is behind rising yields, points to continuity in the central bank's hawkish stance on inflation. For investors, it signals little near-term change in the rate path rather than a shift toward easier policy.