Federal Reserve's Schmidt: Never underestimate the risks faced by inflation expectations

MeNews · 2026-04-04T02:18:55+00:00

Federal Reserve's Smith warns that rising energy prices could have a long-term impact on inflation, which has already approached 3%, with progress toward the 2% target stagnating. He emphasizes the need for policy actions to address inflation expectations risks, despite market views shifting to believe that interest rates will remain unchanged.

MeNews

2026-04-04 02:18:55

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ME News, April 1 (UTC+8). Federal Reserve Governor Schmid warned Tuesday that people should not assume that rising energy prices will only have a temporary impact on inflation, since even before the oil price surged due to the Iran war, the inflation rate was already close to 3%, and the Federal Reserve’s progress toward its 2% inflation target has stalled. Schmid said, “I don’t think we can afford to be complacent about the risks facing inflation expectations.” He also noted that although most measures of medium- to long-term inflation expectations have remained stable, that doesn’t offer him much comfort. “Now our task is to take the appropriate policy action to validate these expectations.” Schmid did not specify which particular policy measures he was referring to, but last year he twice opposed the Federal Reserve’s decision to cut interest rates. Last week, financial markets reflected growing investor sentiment that higher oil prices could prompt the Federal Reserve to raise interest rates later this year to prevent inflation. However, this week, market views have shifted to the belief that the Federal Reserve will keep rates unchanged. (Source: Jin10)

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