Fed’s Schmid says officials must signal commitment to inflation

FEDERAL Reserve Bank of Kansas City President Jeff Schmid said he remained focused on elevated inflation and officials should make it clear they’re willing to do what is needed to achieve price stability.

“With inflation running above the Fed’s 2 per cent definition of price stability for over five years, now is not the time to let down our guard,” Schmid said on Friday (May 29) in remarks prepared for a conference in Reykjavík, Iceland. “We must continue to signal our commitment to price stability and our willingness to take the actions necessary to achieve our mandate.”

Fed officials are turning more attention to inflation after the US-Israeli war with Iran reignited price pressures, raising the cost of fuel and other goods and sinking consumer sentiment.

Amid the acceleration in inflation, a growing number of policymakers have said the Fed should signal its next rate move is just as likely to be a hike as a cut.

The Kansas City Fed chief said the US labour market is in balance after a slowdown in immigration and an acceleration in retirements reduced the number of people looking for jobs. 

“Fewer workers require fewer jobs, explaining both the slow pace of employment growth and the relatively low and stable unemployment rate,” he said.

SEE ALSO

Fed’s Musalem says officials can’t rely on AI boom to fix inflation

US consumer spending edges up as inflation accelerates

US mortgage rate rises to nine-month high, worsening affordability again

Asean Intelligence

Get insights into businesses across South-east Asia

Get the free report

Schmid said earlier this month that inflation was the “most pressing” risk to the economy. Those risks were highlighted Thursday when fresh data showed the Fed’s preferred gauge of inflation rose 3.8 per cent in the year through April, the highest level since 2023.

“My primary concern is inflation, which is too hot and has been above target for too long,” he said Friday. BLOOMBERG