In a speech to the Kansas Bankers Association, Schmid said the recent decline in inflation has been “encouraging” and further reports of low price pressures would add to his confidence that inflation was on a path to the central bank’s 2% target, and to therefore lower interest rates.

“We are close, but we are still not quite there,” Schmid said. He didn’t give a view on when the Fed should cut interest rates: “The path of policy will be determined by the data and the strength of the economy.”

Fed policymakers have pushed back on calls for aggressive actions following a weaker-than-expected jobs report in July, when hiring slowed markedly and the unemployment rate rose to the highest level in nearly three years. Markets are putting greater than even odds on a half-point cut in September.

“Overall, the labor market still appears healthy,” Schmid said. “Last week’s employment report for July led many to question this resilience. But it is important to note that many other indicators point to continued strength.”

Business contacts in the Kansas City Fed region have “a general tone of optimism and resilience,” he added.

Last week policymakers kept interest rates unchanged at a more than two-decade high, yet signaled they were closer to lowering borrowing costs. Chair Jerome Powell said a rate cut could be appropriate as soon as the central bank’s September meeting.

Schmid, who is among the more hawkish Fed officials, said a surge of inflation to a multi-decade high two years ago calls for caution in evaluating progress and “we should be looking for the worst in the data rather than the best.”

Schmid was named to lead the Kansas City Fed last August. The former president and chief executive officer of the Southwestern Graduate School of Banking Foundation at Southern Methodist University’s Cox School of Business was a longtime banker and bank regulator.