The Federal Reserve Needs More Time to Assess Inflation
Previously, Schmidt has been one of the more hawkish policymakers of the Federal Reserve. In his speech at the Kansas Bankers Association annual meeting, he pointed out:
"Considering the inflation shock we have experienced over the decades, we should focus on the worst-case scenario in the data, not the best," Schmidt said, adding that prices in the U.S. may fluctuate, and the Federal Reserve needs "more time" to determine the trend of inflation.
He added, "However, if U.S. inflation continues to stay at a low level, I will be more confident that we can achieve the goal of price stability, and at that point, adjusting the policy stance will be appropriate."
He pointed out that the current inflation rate in the U.S. is about 2.5%, while the Federal Reserve's target is 2%, indicating that the Federal Reserve is close to its goal "but has not fully achieved it yet."
The U.S. Economy Remains Resilient
In last week's rate decision, the Federal Reserve decided to keep the rate unchanged between 5.25% and 5.50%. However, Federal Reserve Chairman Powell hinted that as the risks of inflation and employment in the U.S. tend to balance, the Federal Reserve might start cutting rates in September.
However, the unexpectedly weak non-farm employment data released last Friday sparked concerns that the U.S. economy might face greater risks of recession, suggesting that the Federal Reserve might need to cut rates urgently.
In response, Schmidt refuted this, asserting that the U.S. economy is resilient, and consumer demand remains strong. He believes that although the labor market has significantly cooled, other indicators besides the rising unemployment rate show that the employment situation is still "quite healthy."
Schmidt also pointed out that given the current situation, the Federal Reserve's policy stance is not "too tight." He added that to further reduce inflation, the labor market needs to continue cooling down.
