Jeffrey Schmid
The “main” cause for concern is that inflation is too high. The president of the Federal Reserve Bank of Kansas City, Jeffrey Schmid, has expressed concern about the high inflation rate, which he believes makes it difficult to predict the timing of the current energy shock and its impact on prices. The official cautions against trying to discern the cause of the oil shock. Schmid says his biggest concern right now is the decline in the public’s purchasing power due to rising prices, Thomson Reuters reports.
“We are not applying very tight restrictions right now, but we are discussing what tools we have to strengthen them,” the official said, noting that a possible reduction in Fed assets could help contain growth. “Now is not the time to relax,” he added, given that inflation has long been above the 2% target.
The Federal Reserve is expected to keep the interest rate at between 3.5% and 3.75% at the next Federal Open Market Committee meeting next month. Market participants had previously expected a rate cut at the end of the year, but are now considering a rate hike.
Some Fed officials believe that policy tightening is possible if inflationary pressures do not abate. Others note that the disappearance of rate cut expectations in the markets and the tightening of financial conditions already provide sufficient restraint. They believe that it is still possible to wait and evaluate the data before making new decisions.
Many Fed officials expect inflation to ease at the end of the year, hoping for a resolution of the conflict with Iran that was initiated by President Donald Trump.
