Kansas City Federal Reserve President Jeffrey Schmid stated on Thursday that inflation has shown itself to be "stubborn" and "quite persistent," though he stopped short of committing to support a rate hike. However, he indicated that, in his view, the current level of interest rates is not acting as a drag on the economy. Schmid also expressed support for a proposal put forward by former Fed Governor Kevin Warsh, which advocates for reducing the number of Federal Reserve policy meetings held each year.
Speaking on Thursday, Kansas City Fed President Jeffrey Schmid said inflation remains too high, but he did not directly call for an interest rate increase. In an interview at the Federal Reserve's annual global central bank symposium in Jackson Hole, Wyoming, hosted by the Kansas City Fed, Schmid noted that inflation has demonstrated considerable resilience. He remarked on the program "Financial Morning Report": "Inflation remains stubborn and sticky, and we must continue to find ways to break this situation. Entering the new policy cycle of the Federal Open Market Committee, the task before us remains very challenging."
His comments came a day after the U.S. Commerce Department released the Fed's preferred inflation gauge, which showed core prices, excluding food and energy, rising 3.3% year-over-year—well above the Fed's 2% inflation target. The U.S. economy grew at a 1.5% annualized rate in the second quarter, and the unemployment rate stands at 4.1%.
Given these figures, Schmid said it is not yet certain whether the Fed's current policy rate range of 3.5%-3.75% is having a restrictive effect on the economy. "With this current interest rate policy, I don't see it as constraining the economy. But I acknowledge that adjusting rates will change the behavior of market participants at the macro level," he said.
Schmid does not have a vote on the Federal Open Market Committee (FOMC) this year, but he can still voice his opinions at meetings. During his voting year last year, he twice dissented against decisions to cut rates. However, he said he is not yet sure whether he would support a rate hike this time. "We need more data. Right now, I'm trying to figure out what factors are simultaneously driving both economic growth and rising inflation, particularly on the demand side," Schmid said.
Additionally, Schmid noted that Kevin Warsh's July proposal to reduce the FOMC's annual policy meetings from eight to six warrants further discussion.