Schmid cast the latest hike as part of the work still required to corral price growth, saying, "The Fed has work to do on inflation and this week's action was a step in that direction." He stressed it is not just about oil. Inflation excluding energy has "also been running hot," and a "broad range of goods and services" have seen increases that do not line up with the Fed's price stability mandate. He also described the labor market as appearing in balance and called economic growth solid.
He spoke Friday, two days after policymakers implemented the first rate increase in over three years. In a unanimous decision, policymakers lifted the target for the federal funds rate by 0.25 percentage point to a 3.75%-4% range, pressing ahead even as President Donald Trump urged them to cut borrowing costs. The median projection from policymakers indicated they anticipate at least one additional increase before the year ends.
On Wednesday, Fed Chairman Kevin Warsh said the move "removed a dose of accommodation," signaling officials' focus on the 2% inflation goal. Schmid added that he probably would have supported a hike back in July, when the committee voted 9-3 to keep rates unchanged.
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The bulk of Schmid's prepared comments focused on real-time payments. He urged banks to sign on to FedNow, the Federal Reserve's service that enables instant inter-bank transfers. For everyday investors, the story to track is twofold: how the Fed signals its next steps on inflation, and how widely banks choose to participate in FedNow, which supports instant inter-bank transfers.
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