Fed's Schmid says patience needed to see how tariffs play out

(Reuters) - The Federal Reserve faces a complicated picture for policy decisions, Kansas City Federal Reserve Bank President Jeff Schmid said on Wednesday, noting that while he is hearing nervousness about tariffs in the agricultural sector, a recent decline in energy prices may deliver an offsetting "shot in the arm" that could somewhat limit inflation.

"I just think that we've got to, we've got to be a little patient to see how some of these things play out," Schmid said in a webcast conversation with Dallas Federal Reserve Bank President Lorie Logan at a Dallas Fed event.

At the end of the day, he said, the Fed will "react in a positive way to any of those disruptions that might affect that dual mandate," referring to the Fed's mandates of achieving both price stability and full employment.

Earlier on Wednesday, Fed Chair Jerome Powell said the U.S. central bank would wait for more data on the economy before considering any change in rates. But he warned that President Donald Trump's tariff policies risk both higher inflation and higher unemployment that could potentially force the Fed into choosing which fight to prioritize.

Schmid and Logan did not have an in-depth discussion on interest-rate policy or of recent market volatility as investors digest the implications of Trump's trade policy.

Schmid briefly touched on the importance of the Fed's political independence, which he said is what allows Fed policymakers to set rates with nothing but the financial and economic stability of Americans in mind.

"Everything is being challenged now. ... All the firewalls we thought we had have turned into screen doors," he said. But, he added, "I think you are tested by fire ... and frankly the people I talk to, both politicians and the public, seem to be pleased with that structure, so I'm very optimistic."

(Reporting by Ann Saphir; Editing by Sandra Maler and Leslie Adler)

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