Fed keeps the door open for more rate hikes as Schmid warns there's 'work to do'

Federal Reserve President Jeff Schmid backed the decision to increase interest rates this week, hinting that more rate hikes could be necessary. The Fed's move came after an unanimous decision to raise the benchmark rate to 3.75% to 4% at its Wednesday meeting, the first hike since July 2023. Schmid pointed out that inflation has remained above the central bank's 2% target for over five years, with recent readings indicating a pace surpassing 3%.

He stressed that the Fed should look beyond energy and food prices, such as tariffs, when assessing inflation. Schmid and Fed Chairman Kevin Warsh both indicated that the door remains open for further rate hikes, expressing doubt that underlying trends have significantly improved. The median of 18 Fed member projections, excluding Warsh, suggested that officials anticipate raising rates a second time this year before maintaining them steady next year.