Federal Reserve (Fed) Bank of Kansas City President, Jeffrey Schmid, said it is appropriate to maintain a restrictive monetary policy as inflation approaches 3%. He also noted that the current inflation rate indicates strong demand outpacing supply growth, in comments prepared for delivery to an economic forum in Albuquerque, New Mexico, on Wednesday.

Key takeaways

Further Fed rate cuts could allow higher inflation to persist for longer.

Not seeing evidence current level of interest rates is restraining economy.

Appropriate to keep restrictive monetary policy with inflation close to 3%.

Productivity improvements could allow faster growth without inflation, but 'we are not there yet'.

Current inflation rate indicates still-strong demand is outpacing improvements in supply.

There are opportunities to reduce bank reserve demand and thus lower the Fed's balance sheet.

Price shocks are 'transitory' based on central bank's response, Fed needs to keep focus on 2% inflation target.

Recent improvements in productivity could be about workers staying in jobs longer, as opposed to stemming solely from technology.”