Federal Reserve Bank of Kansas City President Jeff Schmid believes that a tighter monetary policy, specifically higher interest rates, is essential to achieve the Fed's 2% inflation objective. Schmid, whose primary concern is inflation, asserted in remarks prepared for an event in Omaha that the current monetary policy stance is not restrictive, citing robust demand and investment. This perspective was echoed in his statements on August 4, 2026.
Schmid has consistently expressed worries about inflation, noting in July 2026 that it remains above target and citing broad price pressures. While June inflation data showed some improvement, he cautioned against prematurely concluding a trend. He highlighted that the Personal Consumption Expenditures (PCE) index, his preferred measure of inflation, remained elevated; the core PCE, which excludes volatile food and energy, was 3.3% in June, down from 3.4% in May, while headline PCE was 3.7%, down from 4.1% in May.
Schmid emphasized that high inflation is not solely due to supply shocks. He argued that strong demand plays a crucial role in amplifying price increases when supply disruptions occur. He pointed out that while energy prices have fluctuated and contributed to recent inflation trends, inflation excluding energy remained at 3.2% over the prior 12 months, about half a percentage point higher than the previous year. He also noted that the Fed's role is to maintain the aggregate purchasing power of the dollar, for which the PCE index is the best measure.
Schmid's remarks come as economic growth remains steady and the labor market is generally balanced. However, inflation persists, driven by broad price increases. Despite a recent decline in core PCE, Schmid underscored that interest rates have been rising since the beginning of the year. He will not be a voting member of the Federal Open Market Committee until 2028.
