Three US Federal Reserve officials warn inflation remains sticky, with policymakers signalling that higher interest rates could still be needed as markets await Fed Chair Kevin Warsh’s Jackson Hole speech.
Inflation fears are back in focus at the Jackson Hole economic symposium, with three US Federal Reserve officials warning that price pressures remain too high and could require tighter monetary policy.
Kansas City Fed President Jeffrey Schmid said inflation was still “stubborn” and “sticky” and that policymakers needed to find ways to bring it back to the Fed’s 2% target. He also questioned whether the current federal funds rate of 3.50%-3.75% was restrictive enough to cool the economy.
Schmid, who has previously backed higher interest rates, stopped short of committing to a rate hike at the Fed’s September 15-16 meeting, saying policymakers need more information on what is driving economic growth and inflation.
Cleveland Fed President Beth Hammack delivered an equally hawkish message. She said she believed “now is the time to act” and maintained that she was prepared to raise rates if necessary to contain inflation.
Hammack warned that inflation had remained above the Fed’s target for more than five years. She also said she was increasingly hearing concerns about inflation from businesses and other contacts, raising fears that higher prices could become more deeply embedded in the economy.
More from BusinessHer forecast was notably cautious: she expects US inflation to end 2026 at around 3 per cent and said progress next year could be limited, with inflation potentially reaching only the mid-2 per cent range.
Chicago Fed President Austan Goolsbee also flagged inflation as his biggest near-term concern. He warned that rising energy costs linked to the war in Iran, along with uncertainty surrounding US tariffs, could put further pressure on households.
Goolsbee said policymakers should remain alert because a renewed rise in inflation would be difficult to reverse. At the same time, he noted that the latest three-month inflation trend did not look particularly alarming and said rate cuts could remain possible if inflation clearly moves back towards 2 per cent.
The warnings came a day after US data showed the Personal Consumption Expenditures (PCE) price index rose 3.7 per cent in the year to July, unchanged from June but down from 4.1 per cent in May.
The latest inflation data has split economists, with some arguing that persistent price pressures strengthen the case for another rate hike, while others believe tighter policy could come later in the year.
Markets are now turning their attention to Fed Chair Kevin Warsh, who is scheduled to speak at Jackson Hole on Friday. Investors are looking for clues about the Fed’s interest-rate path, particularly whether policymakers are leaning towards another hike or eventual rate cuts.
For now, the message from several Fed officials is clear: inflation remains a problem, and the prospect of higher-for-longer interest rates has not disappeared.
