Fed officials voice fresh inflation concerns at Jackson Hole
A trio of Federal Reserve officials shared on Thursday their ongoing concerns about the U.S. inflation landscape, as central bankers gathered in Jackson Hole, Wyoming for the Kansas City Fed's closely watched annual economic symposium.
Inflation is "still stubborn and it's still sticky and we've got to continue to find ways to break through" and get it back to 2%, Kansas City Fed President Jeffrey Schmid said on CNBC on the sidelines of the conference.
He noted that the U.S. central bank's current policy rate, which was left in the 3.50%-3.75% range at the July 28-29 meeting, did not appear to be restrictive. "I don't know what we're restricting currently with the rate policy that we're at today," Schmid said.
Schmid, who had recently been in favor of raising rates to help bring inflation back down to the Fed's 2% target, seemed to suggest that he would still favor such a path, given his belief that monetary policy is not working to counter current price pressures.
But even so, when asked about the outlook for a rate hike at the Fed's September 15-16 policy meeting, he said, "I think we need a little bit more information. What I'm trying to figure out is the demand side of what's driving both growth and inflation."
Cleveland Fed President Beth Hammack, also speaking on CNBC, was similarly anxious about inflation and reiterated her ongoing willingness to act to bring price pressures back in line.
"I don't want to prejudge anything," Hammack said, "but I believe now is the time to act."
Hammack, one of three Fed officials who dissented at last month's meeting in favor of a rate hike, said inflation has been above target for more than five years and monetary policy is not doing anything at the moment to restrain the economy in order to lower price pressures.
The Cleveland Fed chief said she is hearing more and more from contacts worried about inflation and she fears the longer this trend continues, the greater the risk to the central bank's credibility. Information from local contacts suggests "we're starting to get some of that inflationary mindset" embedding itself in the economy. "I don't think we're there yet, but that's what I want to make sure we avoid," Hammack said.
Meanwhile, Chicago Fed President Austan Goolsbee said his biggest fear in the short run continues to be that inflation is not under control.
"Everybody should be on edge," Goolsbee said on the Rapid Response podcast. "We hear a lot about affordability and we better be mindful because if inflation starts going up again, it's very hard to get rid of it."
Goolsbee noted that rises in energy costs tied to the war in Iran and the constant oscillation in the Trump administration's tariffs are also a concern, as they're hitting households at a time of unacceptably high inflation. He said there is a danger the public could shift toward a view that above-target price pressures are not going away.
The Chicago Fed chief, however, noted that the recent three-month inflation trend "doesn't look terrible." Asked about his outlook for interest rates, Goolsbee said the Fed's policy rate could be lowered over time if there was evidence inflation was heading back to the 2% level.
"If you're a very interest-rate-sensitive industry, I would tell you, watch the data" and "don't get so hyped up about what the market says" about the monetary policy outlook, he told the podcast.
Warsh speech and inflation data keep policy outlook in focus
The regional Fed bank chiefs spoke a day after the government reported that the Personal Consumption Expenditures Price Index, the central bank's main inflation gauge, stood at 3.7% in the 12 months through July, matching the level seen in June but down from the 4.1% year-over-year increase in May.
Economists' reaction to the data was mixed, with some saying the sturdy reading argued for a rate hike next month, while others said it kept tightening in play at some point this year. Futures markets lean against an increase at the next meeting, but put strong odds of it happening by the end of 2026.
Fed Chairman Kevin Warsh is slated to speak on Friday at the Jackson Hole event. Many hope he will share clues about the policy outlook, but those expectations are tempered by the fact that the new U.S. central bank chief is opposed to providing firm forward guidance about rates, and has even refrained, amid mounting controversy, from explaining how he reaches monetary policy decisions.
A number of Fed officials have said in recent weeks that rate hikes are needed to lower inflation, or at least signaled openness to that path.
In his podcast remarks, Goolsbee also noted that a series of political attacks on the Fed, a hallmark of President Donald Trump's relationship with the central bank, "puts me on edge." In nations where political authorities interfere with monetary policy choices, "inflation comes roaring back," he said.
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