Fed Officials Warn Inflation Still Stubborn as Jackson Hole Begins
Two Fed officials warn inflation remains sticky, with rate policy seen as not restrictive enough, as central bankers gather in Jackson Hole.
As central bankers convene in Jackson Hole, Wyoming, for the Kansas City Fed's annual economic symposium, two Federal Reserve officials have voiced fresh concerns about the persistence of high inflation in the United States.
Kansas City Fed President Jeffrey Schmid said inflation remains "stubborn" and "sticky," and that the central bank must find ways to bring it back down to its 2% target. Speaking on the sidelines of the conference, Schmid noted that the current policy rate of 3.50%-3.75% does not appear to be providing the necessary economic restraint. "I don't know what we're restricting currently with the rate policy that we're at today," he said.
Schmid, who has previously favored rate increases to combat price pressures, indicated he would still support such a path. However, when asked about a potential rate hike at the Fed's September 15-16 meeting, he said more information is needed, particularly on the demand side of the economy.
Chicago Fed President Austan Goolsbee described the environment of inflation running above target for over five years as partly "disturbing." He said his biggest short-term fear is that inflation is not under control. "Everybody should be on edge," Goolsbee said on a podcast, adding that if inflation starts rising again, it becomes very difficult to eliminate.
Goolsbee also pointed to rising energy costs linked to the conflict in Iran and the Trump administration's fluctuating tariffs as concerns, as these pressures hit households during a period of already high inflation. He warned of the danger that the public could begin to believe above-target inflation is here to stay.
Despite these worries, Goolsbee acknowledged that the recent three-month inflation trend "doesn't look terrible." He suggested the policy rate could be lowered over time if evidence emerges that inflation is returning to the 2% target.
The officials' remarks come a day after data showed the Personal Consumption Expenditures Price Index, the Fed's preferred inflation gauge, rose 3.7% in the 12 months through July, unchanged from June but down from 4.1% in May.
Attention now turns to Fed Chairman Kevin Warsh, who is scheduled to speak at the conference on Friday. Expectations for clear policy signals are tempered, as Warsh is known to oppose providing firm forward guidance on rates.
Goolsbee also expressed concern about political attacks on the Fed, a hallmark of President Trump's relationship with the central bank, noting that political interference with monetary policy often leads to a resurgence of inflation.