- Schmid reportedly noted that inflationary pressures are evident in goods impacted by President Donald Trump’s tariffs, as well as in services.
- Speaking about the impact of artificial intelligence, Schmid reportedly said while he believes AI and other technologies will ultimately lead to non-inflationary growth, the country was still not “there yet.”
- While inflation slowed down in January, with the consumer price index rising 2.4% year-over-year, it is still above the Federal Reserve’s target of about 2%.
Federal Reserve Bank of Kansas City chief Jeff Schmid reportedly said on Tuesday that the apex bank in America cannot be complacent about inflation.
According to a report from Bloomberg, Schmid noted in prepared remarks for an event in Denver, Colorado, that the latest numbers suggest that inflation in the country is almost one percentage point above the Federal Reserve’s target.
“Inflation has been above the Fed’s objective for nearly five years now,” Schmid reportedly said. “I don’t think we have room to be complacent.”
Schmid also noted that inflationary pressures are evident in goods impacted by President Donald Trump’s tariffs, as well as in services.
Inflation Risk
While inflation slowed down in January, with the consumer price index rising 2.4% year-over-year, it is still above the Federal Reserve’s target of about 2%. Meanwhile, inflation in December came in at 2.7%.
Fed officials are widely expected to hold interest rates steady at the next policy meeting slated for March 17-18. Data from the CME FedWatch tool indicates a 97.3% probability that the central bank will hold benchmark interest rates at the current target range of 3.50% to 3.75%.
Speaking about the impact of artificial intelligence, Schmid reportedly said while he believes AI and other technologies will ultimately lead to non-inflationary growth, the country was still not “there yet.”
While the Kansas City Fed chief said the labor market was in balance, he noted the imbalance in the healthcare sector. Schmid said that high demand for health-care workers amid an aging population would continue to pressure profit margins in that industry, which could push inflation higher up.
Market Reaction
The conflict in the Middle East after the U.S. and Israel launched military strikes on Iran over the weekend has stoked inflation concerns across the country. Crude oil prices have risen amid the closure of the Strait of Hormuz, while stock markets have fallen.
U.S. equities were in the red in Tuesday’s trade at the time of writing. The SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, fell 1.70%, the Invesco QQQ Trust ETF (QQQ) was down 1.85%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) declined 1.90%. The tech-heavy Nasdaq-100 (NDX) was also down by 1.90%.
On Stocktwits, retail sentiment around the S&P 500 ETF was in the ‘bearish’ territory.
The iShares 20+ Year Treasury Bond ETF (TLT) was down by 0.38% at the time of writing, while the iShares 7-10 Year Treasury Bond ETF (IEF) fell 0.23%.
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