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

ME News update, April 1 (UTC+8). On Tuesday, Federal Reserve Schmid warned against assuming that higher energy prices would only have a temporary impact on inflation, noting that even before the Iran war pushed oil prices sharply higher, 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 pointed out that although most measures of longer-term inflation expectations have remained stable, that doesn’t give him much comfort. “Our task now is to take the appropriate policy action to show that these expectations are warranted.” While Schmid did not specify what particular policy measures he was referring to, last year he had twice opposed the Federal Reserve’s decisions to cut interest rates. Last week, financial markets indicated that investors increasingly believed that rising oil prices could force the Federal Reserve to raise interest rates later this year to prevent inflation from taking hold. However, this week, market expectations have shifted to the view that the Federal Reserve will keep interest rates unchanged. (Source: Jin10)