Kansas City Federal Reserve President Jeffrey Schmid said inflation is running too hot and policymakers still have more work to do.
In prepared remarks for a conference in Hawaii on Sunday, Schmid said, "As Chair Kevin Warsh said in August, 'the Fed has some work to do on inflation, and unfortunately our job has gotten harder since then.'"
Price pressures have continued to build in recent months. The Fed's preferred inflation gauge rose 3.6% year-over-year in September, a level Schmid called "uncomfortably" above the central bank's 2% target and "moving in the wrong direction."
The Fed raised rates at its September meeting, its first hike since 2023. Markets widely expect policymakers to raise rates again at their next meeting in December, and investors also broadly anticipate another hike at the January meeting.
After holding rates steady at the October meeting, some Fed officials have said in recent weeks that a faster pace of rate hikes may be warranted. Core consumer price inflation, which strips out food and energy, has now exceeded expectations for three consecutive months.
Schmid pointed to several factors driving inflation higher, including energy costs, rising durable goods prices (partly driven by tariffs), artificial intelligence infrastructure buildout, and healthcare costs. He added that he would be cautious about assumptions that higher oil prices or tariff-driven production costs will only have a temporary effect on inflation.
Schmid also pushed back on the view that the Fed's tools are ineffective against the current drivers of inflation. "The Fed does have the tools to address inflation, and it has a responsibility to deliver price stability," Schmid said.
Beyond that, he said the economy is performing well, with growth holding at a "solid pace" and the unemployment rate low. Schmid said the labor market and wages do not appear to be providing a meaningful push to inflation.
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