Kansas City Fed's Schmid says inflation 'stubborn' and 'sticky,' policy rate not restrictive

• Core inflation rose 3.3% year-over-year in July, significantly above the Fed's 2% target, while the economy grew at 1.5% in Q2 with unemployment at 4.1%
• Schmid questioned whether current rates are restrictive, saying 'I don't know what we're restricting currently with the rate policy that we're at today'
• Schmid expressed support for Fed Chairman Kevin Warsh's proposal to reduce the number of FOMC meetings from eight to six per year

Summary

Kansas City Federal Reserve President Jeffrey Schmid expressed concerns about persistent inflation during an interview at the Fed's Jackson Hole symposium, though he stopped short of advocating for interest rate hikes.

Key Statements:

Schmid characterized current inflation as "stubborn" and "sticky," indicating the Fed has "work cut out for us" moving forward. He questioned whether the current policy rate of 3.5%-3.75% is truly restrictive, stating "I don't know what we're restricting currently with the rate policy that we're at today."

Economic Data:

• Core PCE inflation (excluding food and energy) stands at 3.3% year-over-year, significantly above the Fed's 2% target
• Q2 GDP growth registered 1.5%
• Unemployment rate sits at 4.1%

Policy Implications:

Despite inflation concerns, Schmid refrained from committing to support a rate increase, citing the need for "a little bit more information" on demand-side drivers of growth and inflation. As a non-voting FOMC member this year, he previously dissented twice against rate cuts when he held voting privileges in the prior year.

Additional Development:

Schmid expressed support for Fed Chairman Kevin Warsh's proposal to reduce the number of FOMC meetings from eight to six annually, stating he sees "some room" to consider this change.

The comments underscore ongoing division within the Fed regarding appropriate monetary policy amid elevated inflation and moderate economic growth, suggesting rates may remain higher for longer despite previous market expectations for cuts.