Kansas City Federal Reserve President Jeff Schmid said on Sunday that American inflation is “running too hot” and that the central bank still has work to do to bring price rises back under control.
Speaking to a credit union conference in Hawaii, Schmid said inflation sits “uncomfortably above the 2% price stability target, and moving in the wrong direction”. He stopped short of calling outright for further interest rate rises, but his message was unmistakably hawkish: the Fed, he said, “has some work to do on inflation”.
Schmid used the speech to push back against two arguments that have gained ground in recent weeks. The first is that today’s inflation is largely the product of repeated supply shocks and therefore beyond the reach of monetary policy. That view, he said, misses the point. “Inflation is always the result of an imbalance between supply and demand,” he argued. “It is in the context of strong demand that a disruption to supply drives up prices. Demand always plays a role in inflation, and the Fed, through its influence on demand, always has the tools and responsibility to address inflation.”
The second argument he rejected is that the sources of demand-driven inflation today, above all the boom in artificial intelligence investment, are resistant to higher interest rates. “I would also push back on the idea that meeting our inflation objective requires a reaction from any particular set of prices, for example prices for AI-related technology goods,” he said. Both narratives, he added, share “a common core… that inflation is somehow beyond the Fed’s power to control. I don’t believe this to be true.”
The remarks add to a hawkish chorus inside the Fed. The central bank raised rates by a quarter of a percentage point in September, to 3.75%-4.00%, but held them steady at its October meeting. Since then, inflation readings have come in hotter than expected, and influential Governor Christopher Waller has also sounded a tougher note. Interest rate futures markets are now fully priced for a quarter-point increase at the Fed’s December meeting, with a small probability of a half-point move.
Schmid, who is not a voting member of the rate-setting Federal Open Market Committee this year, echoed the line set by the Fed’s chairman. “As Chairman (Kevin) Warsh said, we have work to do,” he said.
This report is based on a single wire account of Schmid’s remarks; no transcript of the speech has been published by the Kansas City Fed.
Sources: Reuters — “Fed ‘has some work to do on inflation,’ KC Fed chief says” (https://www.reuters.com/world/us/fed-has-some-work-do-inflation-kc-fed-chief-says-2026-11-15/)
