(Reuters) -Kansas City Federal Reserve Bank President Jeff Schmid on Thursday expressed concern that tariffs could rekindle inflation, saying upward price pressure could be apparent in coming months but not fully known for much longer.
The comments show Schmid is likely inclined to hold the Fed policy rate steady not just at its upcoming June 17-18 meeting as is widely expected but for some time after that as well, to make sure that inflation, which is now near the Fed’s 2% goal, doesn’t get out of hand.
“While theory might suggest that monetary policy should look through a one-time increase in prices, I would be uncomfortable staking the Fed’s reputation and credibility on theory,” Schmid said in remarks prepared for delivery to a banking conference hosted at his regional Fed bank’s headquarters.
At the same time, he said, he’s “optimistic” about the economy’s momentum, despite widespread belief that tariffs will slow growth and weaken the labor market.
“While the tariffs are likely to push up prices, the extent of the increase is not certain, and likely will not be fully apparent for some time,” Schmid said. “Likewise, the extent of the drag on growth and employment is also unclear.”
In response, he said, the Fed will “need to remain nimble” to balance its twin objectives of price stability and full employment.
(Reporting by Ann Saphir; Editing by Chizu Nomiyama)
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