Fed Eagles again: Schmidt says interest rates aren't high enough. Paulson warns that inflation risks remain

On 5 August, concerns about inflation risks within the Fed were on the rise. Jeff Schmidt, Chairman of the Kansas Federal Reserve, said that current monetary policy was not strong enough to effectively reduce inflation and might require further tightening in the future. In a speech prepared for an event in Omaha on Tuesday, Schmid local time said: “In view of the intensity of demand and the scale of investment, I do not think the current position on monetary policy is restrictive. I believe, therefore, that more stringent policies are needed to reduce inflation to the Fed's target of 2 per cent.” He stressed that inflation remains one of his top concerns, and warned markets not to simply assume that price pressures caused by supply shocks will recede quickly. On Tuesday, Anna Paulson, the Chairman of the Philadelphia Federal Reserve, also released a cautious signal. She stated that the future direction of monetary policy would depend on the dynamics of core inflation and that she was “open to policy adjustments”. “I think there are two reasonable scenarios of how current policies affect inflation, and subsequent data will clarify which path we are on and what adjustments may be needed.” Paulson wrote in an article published on Tuesday. “I am open to the next steps in the policy.” She stated that if inflation continues to improve in the future and long-term prices are expected to remain stable, the current interest rate level may have reached a “moderately restrictive” state and could “within an acceptable time frame” help to return inflation to the Fed's target of 2 per cent。