Fed 'has some work to do on inflation,' KC Fed chief says
TLT•Kansas City Fed President Jeff Schmid said inflation is uncomfortably above the Fed’s 2% target and moving in the wrong direction. Interest rate futures are fully priced for a quarter-point rate increase at the Fed’s December meeting, with a small probability of a half-point hike.
1. Inflation remains too high
Schmid said the Fed has the tools and responsibility to address price pressures that are “running too hot,” and that it “has some work to do on inflation.” He did not specifically call for additional rate hikes. He said inflation is uncomfortably above the 2% price stability target and moving in the wrong direction.
2. Demand and rate policy
Schmid rejected the view that inflation reflects repeated supply shocks or that demand drivers such as the artificial intelligence buildout are resistant to Fed policy. The Fed raised rates by a quarter-percentage point in September to 3.75%-4.00%, then held them at its next meeting. Following higher-than-expected inflation readings and comments from other Fed officials, futures markets are fully priced for a quarter-point increase in December, with a small probability of a half-point hike.
