BlockBeats report, on August 5, concerns over inflation risks intensified within the Federal Reserve, as Kansas City Fed President Jeffrey Schmid and Philadelphia Fed President Anna Paulson successively signaled a hawkish stance, suggesting that further monetary tightening may be necessary if inflation remains elevated.
Schmidt stated that the current monetary policy stance is "not restrictive," and given strong demand and expanding business investment, the Fed may need to adopt a more restrictive policy to bring inflation back down to its 2% target.
Schmidt warned that markets should not assume that price pressures from supply shocks will dissipate quickly. He expressed concern over the assumption that "soaring inflation is only temporary," noting that the duration of inflation will depend on the Federal Reserve's policy response and market expectations for future policy.
Philadelphia Fed President Powell also stated that the future path of interest rates will depend on the trajectory of core inflation, and expressed that he remains "open-minded" about the direction of policy adjustments.
Paulson noted that if core inflation continues to improve and long-term inflation expectations remain stable, current interest rate levels may already be sufficient to constrain economic growth; however, if core inflation remains persistently high, it would indicate the need for more restrictive policy measures.
She noted that recent U.S. core inflation has only declined modestly and remains in the range of approximately 2.4% to 2.8%, with "persistently high core inflation" still being a key factor in policy assessment.
Last week, the Federal Reserve held rates steady for the fifth consecutive meeting, but three policymakers voted in favor of a 25-basis-point rate hike, arguing that early action could help avoid more aggressive tightening in the future. Recent data showed that U.S. core PCE inflation in June came in below expectations, while consumer spending remained strong. Paulson said the improvement in inflation data "is a step in the right direction," but still represents only limited progress.
In addition, officials are also concerned about potential inflationary pressures from the Middle East conflict and investments in AI infrastructure. Paulson noted that while AI infrastructure development is driving economic growth, it may also push up prices in certain areas.