Summary
- Federal Reserve Governor Christopher Schmid was quoted as warning that rate cuts could prolong inflation.
- Schmid said it is difficult to view the current interest-rate level as slowing the economy and that a restrictive policy stance is justified.
- Schmid said the Fed should focus on its 2% inflation target, and that there is room to reduce bank reserves and the Fed's balance sheet.
Federal Reserve Governor Christopher Schmid warned that cutting interest rates could prolong inflation. He said the current policy stance remains necessary.
According to economic breaking-news account Walter Bloomberg on the 11th (local time), Schmid said, "It's hard to say the current level of interest rates is slowing the economy," adding, "With inflation remaining around 3%, a restrictive policy stance is justified."
He noted that productivity gains could support faster growth without fueling prices, but said, "We haven't reached that stage yet." He added, "Strong demand still exceeds supply," diagnosing that price pressures have not been fully alleviated.
He also stressed that even if temporary price shocks occur, the Fed should stay focused on its 2% inflation target. He added that there is also an opportunity to reduce bank reserves and shrink the Fed's balance sheet.
Schmid's remarks are seen as adding a note of caution to growing market expectations for an early rate cut.
JH Kim
reporter1@bloomingbit.ioHi, I'm a Bloomingbit reporter, bringing you the latest cryptocurrency news.
