Kansas City Fed chief says current rates not restrictive, inflation still 'sticky'

Jeffrey Schmid, president of the Federal Reserve Bank of Kansas City, sounded a note of caution Thursday (local time), saying US inflation remains stubbornly elevated.

Speaking to CNBC on the sidelines of the annual economic policy symposium in Jackson Hole, Wyoming, Schmid said inflation is "still stubborn and sticky" and that policymakers "need to keep finding ways to work through it."

Schmid also questioned whether the Federal Reserve's current benchmark interest rate of 3.50 to 3.75 percent is actually restraining the economy. "I'm not sure what we're restricting with the current interest rate policy," he said.

However, he stopped short of endorsing a rate increase, saying he needs "a little more information" and is trying to identify "the demand-side factors driving both growth and inflation."

Schmid does not hold a voting seat on the FOMC this year, though he participates in meetings and can express views on monetary policy. Last year, when he did have a vote, he dissented twice against decisions to cut rates.

Meanwhile, the personal consumption expenditures (PCE) price index for July, released Thursday, rose 3.7 percent year-on-year, topping the market consensus of 3.6 percent. Core PCE inflation held steady at 3.3 percent, matching the previous month's reading. Markets noted that while price pressures had not reaccelerated sharply, there was no meaningful progress toward the Fed's 2 percent target.