Fed’s Kansas City President Says Rates Aren’t High Enough to Beat Inflation

Kansas City Federal Reserve President Jeff Schmid said Tuesday that monetary policy is not restrictive and that returning inflation to 2% will require tighter policy.

His remarks came less than a week after the Fed held interest rates at 3.50%-3.75%, a decision that three officials opposed, favoring a quarter-point hike.

Schmid Sees No Restriction in Current Policy

Speaking at a Kansas City Fed event in Omaha, Schmid said inflation remains his primary concern. This comes as price growth has exceeded the Fed's target for more than five years.

"Given the strength of demand and investment, I do not see the current stance of monetary policy as restrictive. As such, I believe that bringing inflation down to the Fed's 2% objective will require tighter policy," he said.

Schmid also cautioned against treating supply-driven price inflation pressures as temporary. He argued that such shocks produce larger inflation surges when demand stays strong.

Schmid does not vote on rate decisions this year. However, his stance echoes the three dissenters who split the FOMC 9 to 3 last week. The decision has already rattled investors, sending the Dow sliding and 30-year Treasury yields to 2007 highs.

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