Kansas City Federal Reserve President Jeff Schmid said Tuesday night that inflation is too high and bringing it down will require higher interest rates. Speaking in Omaha, Nebraska, Schmid stated he does not see the current stance of monetary policy as restrictive and believes tighter policy is needed to reach the Fed's 2% objective. He noted that while June's core Personal Consumption Expenditures index decelerated to 3.3% year-over-year, it would be premature to put too much weight on a single data point. Schmid cautioned that strong demand, not just supply shocks, is fueling inflation, and emphasized that the PCE index is the best measure of purchasing power for Fed policy.
Schmid favors higher rates, implying tighter policy and higher yields.
Hawkish Fed comments push long-term yields up.
