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Kansas City Fed’s Schmid calls for tighter policy to cut inflation
He said core PCE decelerated to 3.3% in June, but relying on one reading is premature given recent inflation trends.
Kansas City Federal Reserve President Jeff Schmid said inflation is still too high and that returning it to the Fed’s 2% goal will require a tighter monetary policy stance, according to remarks reported by Yahoo Finance.
Schmid argued the current policy setting is not restrictive enough given the strength of demand and investment, adding that the latest inflation data may be encouraging but that it would be premature to place too much weight on a single month.
He cited the Personal Consumption Expenditures index, saying core PCE was 3.3% in June, down from 3.4% in May, while headline PCE fell to 3.7% from 4.1%. He also noted that core PCE rose 0.1% month over month, versus 0.3% in May, and that volatile oil prices both lifted inflation in prior months and contributed to June’s decline.
Schmid said high inflation is not only an energy story, pointing to inflation excluding energy running at 3.2% over the past 12 months, and he cautioned against attributing inflation solely to supply shocks, emphasizing how strong demand changes the inflation impact of supply disruptions. He also warned that with oil prices rising again, it is uncertain how persistent any relief from energy will be.