Federal Reserve Bank of Kansas City President Jeffrey Schmid said on Thursday that the central bank’s current interest-rate stance is not yet restraining U.S. economic activity, underscoring the possibility of additional policy tightening to bring inflation back to target.
Speaking to CNBC from the Kansas City Fed’s annual research symposium in Jackson Hole, Wyoming, Schmid noted that inflation remains "still stubborn and it's still sticky" and that policymakers must continue to seek ways to break through toward the Fed’s 2% objective. "I don’t know what we’re restricting currently with the rate policy that we’re at today," he said, indicating that the current policy rate has not yet materially dampened growth.
Schmid also highlighted the transmission of an energy shock into broader price pressures and emphasized that the Fed requires more data before determining its next policy steps. He cautioned that unwinding the central bank’s balance sheet—a process known as quantitative tightening—would take time, while suggesting there may be scope to reduce the frequency of Federal Open Market Committee meetings.
The remarks were delivered amid ongoing debate over whether the Fed’s restrictive policy stance has sufficiently cooled demand to ensure inflation sustainably returns to target without causing undue harm to employment or growth.
