Rising Interest Rates Start to Bite on US Economy

Kansas City Fed president Jeff Schmid has expressed concerns about the impact of rising long-term interest rates on the US economy. He pointed to multifamily housing and commercial lending as areas where 'friction' is starting to appear due to increased borrowing costs.

Schmid spoke alongside Richmond Fed president Tom Barkin and Boston Fed president Susan Collins at a conference hosted by the Federal Reserve Bank of Richmond in Asheville, North Carolina. Barkin attributed the rise in rates to strong demand driven by the trillion-dollar AI buildout, while Collins noted that solid economic growth persists despite higher borrowing costs.

Schmid likened the challenge of separating strong demand from supply-driven inflation to a seven-layer dip, saying there are 'too many beans' (demand) and not enough 'chips' (supply). Barkin chimed in with a humorous remark about the same analogy, saying the dip has too much sour cream.