"Eagle sounds everywhere"! Fed officials warn: Inflation has been overheated for too long and may not be temporary!

"Eagle sounds everywhere"! Fed officials warn: Inflation has been overheated for too long and may not be temporary!

Kansas City Federal Reserve President Jeffrey Schmid warned on Thursday that inflation is his biggest concern as it could accelerate further in the coming months. He also cautioned against taking for granted that inflation is temporary.

In a speech at an economic forum, he said that goods and services inflation remained widespread and remained a core concern of monetary policy against the backdrop of a stable labor market.

Schmid further noted that the current inflation rate is about twice the Fed's 2% target, which is "worrying." He refuted the view that high prices are due to temporary factors such as high oil prices, and believed that prices will naturally fall back. "I'm always reluctant to think that spikes in inflation are temporary.

Inflation shocks are not inherently short-lived," he added. Although June's inflation data was better than expected, Schmid warned that it was too early to conclude that this was the start of a trend. "My biggest concern is inflation, which is too high and has been above the target level for too long," he stressed.

"So my focus remains on inflation to set the right policy direction." Policymakers at the Federal Open Market Committee (FOMC) kept their benchmark interest rate unchanged for the fourth consecutive time at last month's meeting, but their latest economic forecasts showed about half of officials believe they will raise rates at least once this year.

A growing number of officials are expressing concern about persistently high inflation, which has been above the Federal Reserve's target for five consecutive years. The Federal Reserve formally established a 2% inflation target in January 2012. Over the next decade, the Fed worked to push prices up to that level.

But in early 2021, the situation reversed, with supply shocks caused by the epidemic and fiscal stimulus measures driving prices sharply higher. The recent rise in energy prices has further exacerbated market concerns.

Schmid said inflationary pressures were not limited to energy prices but included prices for a basket of goods and services, including food, which he noted was rising faster than the pre-pandemic average. "In terms of inflation, we are not where we want to be yet," he said.

Schmid's comments echoed a series of warnings from other officials this week that they were ready to take action to bring inflation back to the Fed's 2% target.

Earlier Thursday, Dallas Fed President Lori Logan even explicitly called for a "modest" further increase in interest rates to win the battle against inflation that the Fed has been unable to outright win over the past five years.

This week, new Federal Reserve Chairman Kevin Warsh also said in congressional testimony that policymakers have "zero tolerance" for high inflation and vowed to restore price stability, but he did not explicitly say he would support raising interest rates.

Federal Reserve Governor Lisa Cook also said on Wednesday that she was prepared to take action if inflation did not start to slow soon, although she was willing to wait a little longer to see how things panned out. Two separate reports this week showed producer and consumer prices rose less than expected in June.

Investors reacted strongly and no longer expected a rate hike this month. But Schmid disputes the economic theory that policymakers can ignore one-time price shocks, saying it fails to take into account the role of demand. "One of the enduring lessons of the pandemic is that inflation is never just a supply issue.

Strong demand is almost always a factor," he said. In addition, Schmid's assessment of the U.S. economy is relatively optimistic and believes that "the labor market is in balance and economic growth remains strong." (

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