Fed rate policy may not be restrictive enough, Schmid warns
“We’re going to have our work cut out for us as we move into the [Federal Open Market Committee] cycle.”
Rate policy not delivering needed restraint
The remarks came one day after the Commerce Department reported that core personal consumption expenditures (PCE) — the Fed’s preferred inflation gauge, excluding food and energy — rose 3.3% year-over-year.
Headline PCE held at 3.7% through July, down from 4.1% in May, but still well above the central bank’s 2% target.
With second-quarter GDP growth at 1.5% and unemployment at 4.1%, Schmid questioned whether the Fed’s 3.5% to 3.75% policy rate is constraining economic activity at all.
“I don’t know what we’re restricting currently with the rate policy that we’re at today,” he said. He stopped short of endorsing a rate increase at the September 15–16 FOMC meeting.
