Kansas City Fed President Discusses Economic Outlook and Instant Payments
In a speech to the North Carolina Credit Union Division, Federal Reserve Bank of Kansas City President Jeffrey Schmid argued that the central bank retains both the tools and the responsibility to lower inflation. Schmid spoke at the annual meeting of the North Carolina Credit Union Management Association, addressing credit union leaders from across the region.
Schmid said that recent inflation readings remain too high. The Personal Consumption Expenditures price index rose 3.6 percent, while the Consumer Price Index increased at a 5.7 percent annualized rate over a recent three-month period.
Schmid dismissed the argument that inflation stems entirely from supply shocks or demand that resists monetary policy. He said that strong demand always plays a role in price increases.
The speech also covered the economic footprint of credit unions. Schmid said that roughly 4,200 federally insured credit unions serve 146 million members and hold $2.5 trillion in assets nationwide.
Drivers of Elevated Inflation
Schmid outlined four specific factors keeping inflation above the Fed’s 2 percent target. He said that the labor market is not currently driving price pressures, with wage growth hovering around 3 percent and a balanced ratio of available jobs to job seekers.
Energy costs remain a primary driver. Disruptions linked to conflict in Iran, limited refinery capacity, and depleted inventories have pushed gasoline and diesel prices higher.
Durable goods prices are also rising. Long-lasting goods increased 2.9 percent in September, pushed upward by tariffs and strong demand.
Infrastructural demands from artificial intelligence are boosting prices for consumer electronics and construction materials. Personal computer prices climbed 10 percent over the past year amid competition for steel, skilled labor, and tech components.
Health care costs are accelerating as well. Employer costs for health benefits increased more than 6 percent over the past year, marking the fastest pace in over two decades.
FedNow enables instant settlements for consumers and businesses
Schmid addressed the evolution of the financial system, emphasizing the role of instant payment networks. He highlighted the Federal Reserve’s FedNow service, which allows eligible institutions to offer 24/7 instant settlements.
Federal Reserve research indicates that 78 percent of consumers prefer faster payment options when available. Additionally, 66 percent of businesses report they are likely to use instant payments if offered by their financial institution.
Schmid emphasized that safety is built into the architecture of FedNow. The system relies on a credit push-only model designed to mitigate settlement risks for households and businesses.
What regions and services the Tenth Federal Reserve District covers?
What regions does the Tenth Federal Reserve District cover?
The Tenth Federal Reserve District includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming, western Missouri, and northern New Mexico. The region contains 295 credit unions and 657 commercial banks.
What is the primary architectural feature of the FedNow service?
FedNow relies on a credit push-only architecture. This design ensures that funds move securely between institutions with immediate availability for recipients.
How much do federally insured credit unions hold in assets?
Nationwide, roughly 4,200 federally insured credit unions hold approximately $2.5 trillion in assets. They serve a total of 146 million members.
Related reading