"Constraints lead to difficult decisions over how to balance competing objectives, and the Fed has been tasked with these difficult decisions when it comes to inflation and employment, he said. In balancing this constraint, my view is that the Fed must maintain its credibility on inflation. He said inflation expectations remain stable but warned that could change quickly if policy loosens too fast."
"Schmid pointed to persistent price pressures in both goods and services citing housing costs, utilities and electricity as key contributors. He also noted that tariffs have pushed durable goods prices higher than historical trends. One worrying sign is that price increases are also becoming more widespread. At the start of the year, 70% of consumption categories reported price increases. By August, almost 80 percent of categories had increasing prices, he said."
The Federal Reserve faces trade-offs between inflation and employment and must preserve credibility on inflation. Inflation expectations are currently stable but can rise quickly if policy loosens too fast. Policymakers view expectations as an outcome of policy choices rather than an independent input. A data-dependent approach will guide decisions ahead of the Oct. 28-29 FOMC meeting, with alternative labor market and price indicators used while government data remain unavailable. Inflation remains above the 2% price-stability goal, with 12-month increases near 2.7%–3%. Price pressures are persistent across goods and services, and price increases are becoming more widespread.
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