Concerns Over Inflation Expectations

Federal Reserve Bank of Kansas City President Jeff Schmid expressed concerns on Thursday about the potential for a further jump in prices, possibly exacerbated by tariffs, to push up inflation expectations. "Once inflation is embedded in expectations, it becomes much more difficult to contain," Schmid warned, emphasizing his commitment to maintaining the Fed’s credibility on inflation amidst calls from President Donald Trump for interest rate cuts.

Economic Strength Meets Challenges

Despite the US economy's current strength, marked by sustained momentum and a healthy labor market, Schmid highlighted the challenges ahead. The Fed faces the delicate task of balancing inflation risks against concerns for growth and employment, especially given the elevated uncertainty and rising near-term inflation expectations.