Jeff Schmid, president of the Federal Reserve Bank of Kansas City, said inflation is his biggest concern, given that it could accelerate further in the coming months.
Although June’s inflation data came in better than expected, Schmid warned it is too early to conclude that this marks the beginning of a trend.
“My main concern is inflation, which has been too high for too long and has already exceeded the target level,” Schmid said Thursday at an economic forum hosted by the Federal Reserve Bank of Kansas City in Nebraska. “Therefore, my focus remains on inflation to determine the right policy direction.”
Schmid said inflationary pressures extend beyond energy prices to a basket of goods and services, including food, noting that food prices have been rising faster than the average level before the pandemic.
He said, “Regarding inflation, we haven’t yet reached the target we want.”
These remarks echoed a series of warnings from other officials this week, who said they are prepared to take action to bring inflation back to the Federal Reserve’s 2% target. Earlier on Thursday, Dallas Fed President Lorie Logan called for higher interest rates.
Logan said in a speech prepared for an event in Houston on Thursday: “I currently believe that a moderate increase in interest rates would better balance the Federal Reserve’s outlook and risks regarding its dual mandate of price stability and full employment.”
She added, “If inflation cannot reach 2% on its own, then at least some policy measures are needed to help achieve this target.”
In recent months, the outbreak of war between the United States and Iran caused energy prices to surge sharply, but data released this week showed that consumer inflation cooled in June as gasoline prices declined.
“A month of relief measures is far from enough. It’s time to complete the work of restoring price stability,” Logan said.
Logan, who is a voting member of this year’s Federal Open Market Committee (responsible for setting interest rates), considered the possibility of a more optimistic inflation outlook. Citing June’s inflation data, she noted that if prices for housing and non-housing services continue to slow, overall price increases could decline further.
Philip Jefferson, vice chairman of the Federal Reserve, said the Fed should consider raising interest rates if inflation does not cool down soon, but he also stated that the current monetary policy outlook is favorable.
“If actual inflation does not begin to cool down in the near term, I think we might need to reconsider our current policy stance,” he said. “Fortunately, our current policy position enables us to respond well to economic developments.”
