Kansas City Fed President Jeff Schmid said Tuesday that the Federal Reserve's inflation problem isn't only about energy, and bringing inflation down to the Fed's 2% objective will require tighter policy.
Speaking at the Federal Reserve Bank of Kansas City Agricultural Economic Summit in Omaha, Neb., Schmid said measures of inflation that exclude energy are still running solidly above 2%, revealing an underlying trend in the data.
"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," Schmid said.
Schmid isn't a voting member on the Federal Open Market Committee this year, but has repeatedly raised concerns about consistent price pressures and the importance of returning inflation back to the central bank's 2% target to preserve the Fed's credibility.
When discussing inflation supply shocks, Schmid said he is uncomfortable ever assuming that a burst of inflation will be temporary.
Schmid also said that monetary policy works best when policymakers remain focused on aggregate price indexes and largely ignore the distribution of relative price changes occurring beneath the surface.
"The Fed, through its influence on demand, always has a role to play when it comes to keeping inflation in check, no matter the proximate cause of that inflation," he said.
Schmid added that the labor market is in balance, leaving his focus on price pressures.
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