The Federal Reserve's hawkish tone on monetary policy resurfaces! Previously, there were three dissenting votes against the FOMC interest rate hike, and now regional Fed officials are sounding the alarm that "policy is not tight enough."

Jeff Schmid, the president of the Kansas City Federal Reserve Bank, stated on Tuesday that further interest rate increases may be necessary to achieve the Federal Reserve's price stability goals, reiterating that inflation remains his primary concern. In remarks prepared for an event in Omaha, Schmid said, "Given that demand and AI infrastructure investment remain strong, I do not believe the current monetary policy stance is tight or restrictive. Therefore, I think that to bring inflation down to the Fed's 2% target, more restrictive policies need to be implemented." There are significant disagreements among senior Federal Reserve officials regarding the necessary strength of action to curb inflation. Inflation has exceeded the central bank's target for more than five consecutive years, and price pressures have recently risen significantly due to the war in Iran and ongoing large-scale investments in artificial intelligence. Federal Open Market Committee (FOMC) policymakers voted last week to keep the benchmark interest rate unchanged. However, three Federal Reserve voting members cast dissenting votes, advocating for a 25 basis point increase instead of remaining idle, concerned that delaying an increase now could necessitate more aggressive actions in the future. Schmid does not have voting power on the FOMC this year, but he warned against assuming that inflation pressures stemming from supply shocks will quickly dissipate. He stated that when demand is also strong, such events are more likely to lead to a significant rise in inflation. In an interview, Schmid said, "For any sudden round of inflation, I am unwilling to assume that it is merely a temporary inflation effect. How long inflation spikes persist ultimately depends largely on how FOMC policymakers respond collectively, or how the market expects the Fed to respond." Earlier on Tuesday, another regional Fed presidentAnna Paulson of the Philadelphia Fedindicated that she would maintain an "open mind" regarding future interest rate paths based on inflation developments. The communication issues highlighted by reporter Nick Timiraos, dubbed the "new Fed whisperer," have substantive market implications: the FOMC statement simultaneously conveyed "strong growth, robust investment, and elevated inflation" while "maintaining interest rates" without adequately explaining why these conditions were insufficient to trigger a rate hike; in contrast, the three dissenting statements more clearly illustrated the Fed's policy response function. In terms of trends in financial asset pricing, a rate hike in September has become a real risk rather than a tail risk, but has not yet formed a stable majority: if core inflation remains high, and oil price shocks spill over into service prices and inflation expectations, moderates like Paulson may shift to support a 25 basis point hike; if core inflation falls continuously over several months, energy prices cool, and demand slows down, the Fed may choose to wait. Hawkish voices within the Fed are rising again, suggesting that delaying a rate hike might lead to more aggressive actions in the future. With inflation still significantly above 2%, the labor market close to full employment, and consumer and AI capital spending remaining resilient, there is a clear division among Fed officials regarding whether the current policy interest rate of 3.50%-3.75% has created sufficient constraints. At its meeting in late July, the FOMC voted 9 to 3 to maintain interest rates, with Harker, Kashkari, and Logan all advocating for an immediate 25 basis point increase; this indicates that the debate is no longer about "whether to continue combating inflation," but whether to wait for inflation to cool on its own or to preemptively reestablish stronger demand constraints. Schmid and Harker are on the clearest hawkish end: both believe that current policy is, in fact, not tight enough. Schmid emphasized that in an environment of strong demand and investment, rising input prices from AI infrastructure, and recurring energy shocks in the Middle East, supply shocks should not be mechanically viewed as "temporary inflation"; whether supply shocks turn into persistent inflation depends on the strength of aggregate demand and whether the market believes the Fed will take action. Harker's logic is more directinflation has been above target for more than five years, and the labor market can withstand higher rates, so remaining idle may solidify inflationary persistence. While Logan and Kashkari also voted for a rate hike, their policy frameworks are not entirely the same. Logan focuses on insufficient real constraints: if monetary policy does not exert downward pressure on demand and prices, inflation must depend on unexpected shocks to decline, and the Fed cannot rely on oil prices or supply chain improvements to achieve the 2% goal. Kashkari emphasizes risk management and path dependency: it is better to tighten gradually and slightly now rather than wait for inflation to become entrenched and then be forced to implement larger hikes that would have a stronger economic impact. This illustrates that the three dissenting votes were not a coordinated hawkish performance, but rather arrived at the same conclusion from three different perspectives: "potential inflation is too high," "policy is not restrictive enough," and "to prevent future loss of control." Paulson and William Dudley, the New York Fed president who holds permanent voting rights on the FOMC during his term, represent a more cautious wait-and-see position, closer to a majority that relies on data. Paulson expects that potential inflation, excluding temporary factors such as energy and tariffs, remains between 2.4% and 2.8%, but she also sees high mortgage rates, weak demand from some households, and a slowdown in wage growth, thus retaining two scenarios: the current policy may be moderately restrictive or may still not be sufficient to lower inflation; only a continuous improvement in core inflation over several months or persistent stubbornness can confirm the next step forward. Dudley is relatively more confident, with a baseline judgment that underlying inflation will continue to cool in the second half of the year and that current rates are "well positioned." However, he also clearly states that once the economy deviates from the path back to 2%, action should be taken. Their positions do not oppose a rate hike but call for more substantial evidence than just monthly data.