Kansas City Fed's Schmid: Inflation Above 2% Target Needs More Fed Action

Kansas City Fed President Jeff Schmid stated on August 26, 2026, that inflation remains "uncomfortably above the 2% price stability target" and the Federal Reserve "has some work to do on inflation." Schmid emphasized that inflation results from an imbalance of supply and demand, with strong demand playing a key role. He rejected views that current inflation is mainly due to supply shocks or demand that is resistant to Fed policy, such as AI-related demand. Schmid reiterated that the Fed retains the tools and responsibility to manage inflation.

While Schmid did not explicitly call for new rate hikes, the Fed recently raised interest rates to a range of 3.75% to 4.00% in September 2026 and paused increases last month. Market expectations now fully price in a 0.25% (quarter-percentage point) rate increase in December 2026, with a smaller chance of a 0.5% hike. Separately, Boston Fed President Susan Collins expressed support for gradual rate increases to manage economic risks and uncertainties.

These statements highlight ongoing Fed concerns about inflation remaining elevated despite prior rate hikes. The Fed's upcoming decisions on interest rates and managing inflation pressures will be closely watched by investors. The comments indicate the Fed is likely to continue using interest rate policy as its main tool to bring inflation back toward the 2% target, affecting borrowing costs and market conditions.