Jeff Schmid took the stage at an economic forum in Nebraska on July 16 with a clear warning. Inflation is not beaten yet, and he is not ready to take his foot off the brake.
"My primary concern is inflation, which is too hot and has been above target for too long," Schmid said. He pointed to the Fed's official goal of 2% annual inflation and said the actual numbers have been running well above that for an extended period.
The timing of his comments matters. Just a month earlier, in June, both producer and consumer price reports came in lower than analysts had expected. That cooler data led many investors to hope the Fed might be done raising rates - or even start cutting them soon.
Schmid pushed back on that optimism. He cautioned that despite the encouraging June figures, declaring the start of a downward trend would be hasty. Price pressures have spread beyond energy into a wide range of goods and services. Food prices, he noted, are rising faster than they did before the pandemic.
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As a voting member of the Federal Open Market Committee this year, Schmid's views carry extra weight. The Fed has held its benchmark rate steady since its last increase, and policymakers have signaled they may need to keep borrowing costs elevated for longer than many had anticipated to ensure inflation recedes sustainably.
One of Schmid's key points was that inflation is not a simple supply‑side story anymore. He said the pandemic taught the Fed that blaming inflation solely on broken supply chains is a mistake.
"One of the enduring lessons of the pandemic is that inflation is never just an issue of supply alone," Schmid said. "Strong demand is almost always a factor as well."
Minutes from the Fed's June 16-17 meeting revealed growing concern about price pressures even while worries over the labor market diminished slightly.
Schmid's comments align with several cautionary statements made by other Fed officials in recent days. Lorie Logan, head of the Dallas Fed, advocated for raising interest rates. While testifying before Congress, Fed Chairman Kevin Warsh stated that policymakers have "no tolerance" for elevated inflation and pledged to bring prices back under control, but he refrained from indicating he would back rate increases.
Schmid's hawkish tone underscores the Fed's cautious approach. The central bank has been navigating a tight path between curbing inflation and avoiding a recession. With the labor market still resilient, policymakers have the leeway to maintain higher rates for longer.
Aside from his inflation concerns, Schmid offered a positive outlook on the U.S. economy.
"The labor market is in balance and growth remains resilient," he said.
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