Lates News

Federal Reserve's Schmid said on Wednesday that high inflation remains a key issue that the Federal Reserve needs to address, but he did not specifically state how monetary policy should respond. Schmid said, "I think we still have work to do in terms of inflation" and at the same time "I think the employment situation is quite good." He did not elaborate on how these factors would affect his assessment of the prospects for monetary policy. Schmid had previously been skeptical of the Federal Reserve's interest rate cuts last year when officials lowered the target rate range to 3.5% to 3.75%. The market expects the Federal Reserve to further lower interest rates this year, but officials have provided little guidance. Schmid also mentioned the Federal Reserve's balance sheet, saying that internal discussions focus on understanding the appropriate level of reserves needed by the financial system. He pointed out that the large amount of mortgage-backed securities held by the Federal Reserve from past bond purchases continues to suppress housing lending costs. Due to the current size of the Federal Reserve's holdings of mortgage-backed securities, mortgage rates "may be 75 to 100 basis points lower than they otherwise would be."