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Fed’s Schmid cautions inflation is not intrinsically transitory

Kansas City Fed President Jeff Schmid said policymakers should not overreact to a single softer CPI reading, citing inflation running about twice the Fed’s 2% goal.

Reported · Written up by our desk · Central Banks

Kansas City Fed President Jeff Schmid warned against concluding that inflation will naturally fade after a softer-than-expected June CPI report, arguing price pressures remain broad-based and the inflation level is still too high, according to a speech covered by Action Forex.

Schmid said current inflation is roughly double the Fed’s 2% target and called that situation “concerning,” linking the outlook to the continued resilience of the labor market. He stopped short of calling for another rate hike, but emphasized it would be premature to place too much weight on one month’s data versus recent trends, while also stating he is “uncomfortable” assuming an inflation burst will be temporary.

He further cautioned that recent relief from lower energy prices may not last, pointing to rising oil prices and saying it is uncertain how persistent any energy-related relief will be. His remarks reinforced the Fed’s preference for sustained evidence of easing inflation before changing policy.

Schmid also addressed Fed communication, defending the need for clear accountability and transparency even as Chair Kevin Warsh has argued for a more restrained approach to forward guidance. “Independence demands accountability,” he said, adding that explaining how decisions are reached helps preserve public confidence and avoids perceptions of political influence.

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