Fed Official Admits Inflation Remains Stubborn, Signaling Accommodative Policy
Kansas City Fed President Jeff Schmid stated at Jackson Hole that inflation remains stubborn and sticky, with headline PCE running at 3.7% year-over-year in July—well above the Federal Reserve’s 2% target. He described the current federal funds rate of 3.75% as accommodative rather than restrictive, signaling an end to further tightening despite elevated price pressures. Schmid noted that inflation has not trended downward as expected and emphasized the need for progress toward a 2% goal. A shift in tone from this historically hawkish official suggests policymakers are leaning toward maintaining current rates even if inflation remains above target longer than anticipated. The Fed is also grappling with durable demand drivers like AI-driven data center growth, which could create lasting commodity price pressures. The accommodative stance leaves savers at a disadvantage as average 12-month CDs yield just 1.71%, eroding purchasing power against higher inflation rates.
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Topics: Fed Inflation Interest Rates Monetary Policy PCE