Concerns Over Inflation and Fed's Credibility

Federal Reserve Bank of Kansas City President Jeff Schmid expressed his concerns on Thursday about the potential for rising inflation expectations, particularly in the wake of price jumps caused by tariffs. "Once inflation is embedded in expectations, it becomes much more difficult to contain," Schmid warned, highlighting the importance of maintaining the Fed’s credibility on inflation amidst calls for interest rate cuts.

US Economy at a Crossroads

Despite the US economy entering a challenging period from a position of strength, thanks to sustained momentum and a healthy labor market, Schmid cautioned about the delicate balance the Fed must strike. Elevated uncertainty and increases in near-term inflation expectations pose significant challenges, requiring careful consideration of inflation risks against growth and employment concerns.