Fed's Schmid: Inflation Remains a Key Issue for the Fed

Odaily News Federal Reserve Bank of Kansas City President Jeffrey Schmid said on Wednesday that excessively high inflation remains a key issue the Fed needs to address, but he did not specify how monetary policy should respond. Schmid stated, "I think we still have work to do on inflation," while adding, "I think the employment situation is quite good." He did not explain how these factors influence his judgment on the outlook for monetary policy. Schmid had previously expressed skepticism about the Fed's push for interest rate cuts last year, when officials lowered the target interest rate range to 3.5% to 3.75%. Markets expect the Fed to implement further rate cuts this year, but officials have provided little guidance. Schmid also discussed the Fed's balance sheet, saying internal discussions are focused on understanding the appropriate level of reserves needed by the financial system. He noted that the large amount of mortgage-backed securities held by the Fed from past bond purchase programs continues to depress housing borrowing costs. Due to the current scale of mortgage bonds held by the Fed, mortgage rates "may be 75 to 100 basis points lower than they otherwise would be."