Schmid: Inflation Remains Key Risk, High Oil Pressures Purchasing Power
Kansas City Federal Reserve President Jeffrey Schmid emphasized that continued inflation remains the most pressing risk to the US economy, and that it is "clear" that price pressures remain too high. He made the remarks in a speech at a banking industry conference on Thursday (May 14).
Schmid assessed that US economic fundamentals remain solid and demonstrate "remarkable" resilience, with the labor market deemed to remain functioning effectively. However, he emphasized that high oil prices continue to pressure household purchasing power and raise costs for businesses, although the US economy is now considered less vulnerable to global oil disruptions than in the past.
In terms of market transmission, high oil has the potential to prolong inflationary pressures and reduce the scope for monetary policy easing. In the context of interest rates, "sticky" inflation tends to encourage expectations that interest rates will remain higher for longer, which in turn affects financial conditions and funding costs.
Schmid also stated that consumption remains the primary driver of economic activity, with wealth gains leading many households to increase spending. On the corporate side, business investment remains strong, particularly in technology spending and AI infrastructure development.
Regarding system stability, Schmid assessed that the banking sector's fundamentals remain sound. Going forward, the market will monitor whether inflationary pressures spread again through energy and services channels, and whether consumption and investment resilience remain strong amidst still-restrictive energy costs and interest rates. (Arl)
Source: Newsmaker.id
