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

ME News message. On April 1 (UTC+8), Federal Reserve Vice Chair Schmid warned on Tuesday that people should not assume rising energy prices would only have a short-term impact on inflation. He said that even before the Iran war caused oil prices to surge, the inflation rate was already nearing 3%, and the Fed’s progress toward its 2% inflation target had stalled. Schmid said, “I don’t think we can afford to take lightly the risks facing inflation expectations.” He also pointed out that although most measures of medium- to long-term inflation expectations have remained stable, that does not offer him much comfort. “Now our task is to take the corresponding policy actions to prove these expectations.” Schmid did not specify what specific policy measures he was referring to, though last year he had opposed the Fed’s decision to cut interest rates twice. Last week, financial markets reflected an increasing belief among investors that higher oil prices could prompt the Fed to raise interest rates later this year to prevent inflation. But this week, market views have shifted to the expectation that the Fed will keep interest rates unchanged. (Source: Jin10)