Kansas City Fed President Discusses Impact of Rising Long-Term Interest Rates

<p>Kansas City Fed president Jeff Schmid stated that the ongoing increase in long-term interest rates is beginning to affect various sectors of the economy, as reported by Axios on October 1, 2026. </p><ul><li>Schmid noted, "You're starting to see some friction in some of the long-market users of credit," specifically mentioning multifamily housing and commercial lending.</li><li>He also indicated that rising mortgage rates are impacting home prices, which reflects the relationship between credit pricing and valuation. Schmid made these comments during a conference focused on investing in rural America, hosted by the Federal Reserve Bank of Richmond in Asheville, North Carolina.</li></ul><p><strong>Additional Insights:</strong> Schmid spoke alongside Richmond Fed president Tom Barkin and Boston Fed president Susan Collins, who also addressed the factors contributing to the increase in borrowing costs.</p><ul><li>Barkin remarked, "I think you're seeing this trillion-dollar AI buildout, and I think it's not surprising that rates go up if you've got a lot more demand out there." </li></ul><p><strong>Collins added</strong> that investment in AI is contributing to solid economic growth, which has continued despite rising borrowing costs.</p><ul><li>She stated, "I think it does have broader effects, not just in particular sectors," but noted that it "remains to be seen" whether investment will maintain its current pace.</li></ul><p><strong>Schmid compared</strong> the Fed's challenge of distinguishing between strong demand and supply-driven inflation to a seven-layer dip, which he described as one of his favorite foods.</p><ul><li>He explained, "The beauty of a seven-layer dip is you have equal amounts of beans and sour cream," adding that currently, with AI and data centers, "there's too much beans in that dip." </li><li>Barkin humorously responded, "And not enough chips!"</li></ul>