Kansas City Fed's Schmid Warns Inflation Is Too Hot

Kansas City Federal Reserve President Jeff Schmid said interest rates may be too accommodative as inflation remains above the Federal Reserve's 2% target, Jennifer Schonberger reported for Yahoo Finance.

Kansas City Federal Reserve President Jeff Schmid says inflation remains above the Fed's 2% target and argues that monetary policy may not be restrictive enough. [Photo: Kansas City Federal Reserve]

“We haven't achieved our mandated goal of 2%,” Schmid told Yahoo Finance. “I'm a very strong believer that if we're going to have a scorecard for the Fed, it's got 2% inflation, it's got stable prices on it. We're not there.”

Schmid said the short-term policy rate was “very accommodating” and pointed to the three dissents at the Federal Open Market Committee's July meeting.

He said he would have sided with those arguing that inflation remained too high and that action was needed sooner to reduce the risk of requiring more severe rate increases later.

Schmid is not a voting member of the FOMC in 2026. He dissented twice last year against rate cuts, arguing that inflation remained too high.

Schmid acknowledged that higher energy prices linked to the conflict in the Middle East were contributing to inflation but said he was more focused on underlying demand in the economy.

He pointed to demand for commodities and technology used to build data centers, noting that demand was coming not only from large technology companies but also from medium-sized and small businesses.

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He also cited a 20% to 30% increase in agricultural commodities in recent weeks as another potential source of inflationary pressure.

Schmid said monetary policy can influence demand-driven inflation and that policymakers need to distinguish those pressures from temporary supply shocks.