NEW YORK (Reuters) - Kansas City Federal Reserve President Jeff Schmid said on Friday the U.S. central bank should not be weighing interest rate cuts at this time because inflation remains above its 2% target and the job market is strong.

"With inflation still running above 2 percent and labor markets still tight, it is appropriate that monetary policy remain restrictive," Schmid said in prepared remarks for a speech to the 2024 Agricultural Commodity Futures Conference in Overland Park, Kansas.

Inflation started off 2024 at too high a pace and "this recent data underscores what I believe is the need for the Federal Reserve to be patient as we wait for clear and convincing evidence that inflation is on track to sustainably return to 2 percent," Schmid said.

He spoke as a raft of data on both the inflation and hiring fronts has driven a wide range of Fed officials to say that while rate cuts remain likely this year, the kick-off for the policy easing may come later and the extent of the reductions in borrowing costs may be less than was recently expected. Fed officials are watching to see if inflation again begins its retreat back to 2% and have argued now is the time for the central bank to be patient.

Schmid noted that the job market remains strong amid evidence that suggests it still is somewhat out of balance. He said economic growth remains above trend and activity has been resilient in the face of the aggressive Fed rate hikes, which have pushed the policy rate up by 5.25 percentage points since March of 2022.

The Kansas City Fed chief said the job market will likely need to get weaker for inflation to go back to the target, noting that "achieving better balance in the labor market will likely be necessary."

Schmid also weighed in on the Fed's ongoing effort to shrink the size of its $7.5 trillion balance sheet. Fed holdings had more than doubled to roughly $9 trillion by the summer of 2022 on central bank stimulus efforts tied to the COVID-19 pandemic and have been shrinking since later that year. The Fed is currently weighing whether to slow the pace of the runoff of its Treasury bonds and mortgage-backed securities.

Schmid said he'd like to see a much smaller Fed balance sheet, adding that the current size of the Fed's holdings of cash and bonds is depressing interest rates.

As the Fed continues to shrink its holdings, "that liquidity remains abundant," he said. Market rate levels "imply that our current pace of balance sheet reduction is not creating strains in funding markets."