Fed's Schmid Backs Rate Hike, Cites Inflation Trending Above 3%

Kansas City Federal Reserve President Jeff Schmid on Friday voiced his support for the central bank’s recent decision to raise interest rates, identifying broad-based inflation as a key concern that justifies tighter monetary policy.

Broad-Based Inflation Concerns

Speaking to a Colorado banking group, Schmid argued that the inflation problem extends beyond high energy costs. He pointed out that inflation excluding volatile energy prices has also been "running hot," with price growth across a wide range of goods and services remaining inconsistent with the Fed's objective.

Key takeaways from his remarks include:

• Inflation appears to be trending above 3%.
• This is significantly higher than the Federal Reserve's official 2% target.
• The issue is widespread and not isolated to a single sector like energy.

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Policy Context

While Schmid's comments add to the hawkish tone from some Fed officials, it is important to note that he is not a voting member of the rate-setting Federal Open Market Committee (FOMC) this year. His views provide insight into the range of opinions within the central bank but do not directly determine policy outcomes.

Schmid did not indicate whether he believes further rate hikes will be needed to bring inflation back to the Fed's target. This leaves the door open for a data-dependent approach, in line with the committee's recent communications.