Kansas City Fed President Says Oil Price Shock Is Not Transitory

Federal Reserve Bank of Kansas City President Jeffrey Schmid stated that the current global energy shock cannot be dismissed as transitory because baseline inflation is already elevated. Speaking at a conference in Iceland, Schmid noted that inflation has remained near 3 percent and above the Fed's 2 percent target for an extended period.

Schmid argued that current monetary policy may not be restrictive enough and suggested the central bank may need to consider additional tools. "We're not very restrictive at this stage and I think there's some dialogue that we need to start considering what tools we have to really make it a little bit more restrictive depending on how the oil shock plays out in an environment of already high inflation," Schmid said.

Schmid also suggested that the Fed may need to examine its balance sheet as another potential tool to tighten policy.