Fed’s Schmid: Tariff impact uncertain, policy must stay nimble

Kansas City Fed President Jeff Schmid acknowledged in a speech overnight that monetary theory may suggest to “looking through a one-time price shock”, he would be “uncomfortable staking the Fed’s reputation and credibility on theory alone.”

Despite the expected drag from tariffs, Schmid remains “optimistic” about the economy’s momentum. However, he acknowledged that both the inflationary and growth implications of tariffs are highly uncertain.

As a result, he argued that Fed will “need to remain nimble”, and be prepared to adjust its stance as needed to maintain both price stability and maximum employment.