The Kansas City Fed President Said Inflation Is ‘Sticky’ And Believes The Central Bank Has Not ‘Broken Through’

Kansas City Federal Reserve President Jeffrey Schmid said inflation is "still stubborn and it's still sticky," and the central bank has not yet managed to "break through."

Speaking to CNBC on Thursday, Schmidt, who does not vote on FOMC decisions, added that Fed members will "have our work cut out for us as we move into the cycle."

He went on to say "I don't know what we're restricting currently with the rate policy that we're at today," but "I do know moving the rate does change behaviors in the market in a macro level market."

"I think we need a little bit more information. What I'm trying to figure out is the demand side of what's driving both growth and inflation," Schmid said.

The remarks came after the central bank's preferred inflation gauge rose 0.2% in July, in line with forecasts from analysts.

Concretely, the core personal consumption expenditures price index gained 0.2% last month and clocked in at 3.3% for the year, data from the Department of Commerce showed.

The index that does not exclude more volatile components like food and energy also rose 0.2% and put the annual inflation rate at 3.7%, above analysts' expectations.

Elsewhere, the report showed that personal income rose 0.4% and spending gained 0.2%. Both figures were stronger than previous expectations.

The central bank kept rates unchanged in its July meeting, but three officials voted for a hike. The minutes released last week showed that members of the Federal Open Market Committee said they would need to hike rates unless inflation cools over the next months.

"Many participants assessed that policy tightening would likely be necessary if inflation did not decline," reads a passage of the meeting's summary.

"Some participants commented that financial conditions might not currently be sufficiently restrictive to facilitate a return of inflation to 2 percent."

The minutes addressed the vote of the dissenters, who claimed that hiking rates "would likely help forestall the need for a steeper and potentially more costly sequence of tightening moves at a later stage."

Cleveland Federal Reserve president Beth Hammack said earlier this month that more than one interest rate hike could be needed. She claimed on Thursday that "now is the time" to act on the matter.