Federal Reserve's Schmid: Inflation remains a key issue for the Fed

Federal Reserve Chairman Eric Schmid said on Wednesday that excessive inflation remains a key issue the Fed needs to address, but he did not specify how monetary policy should respond. "I think we still have work to do on inflation," Schmid said, adding that "I think the job market is pretty good." He did not explain how these factors influence his assessment of the monetary policy outlook. Schmid had previously expressed skepticism about the Fed's rate cuts last year, when officials lowered the target interest rate range to 3.5% to 3.75%. Markets expect further rate cuts this year, but officials have offered little guidance. Schmid also addressed the Fed's balance sheet, saying internal discussions focused on understanding the appropriate level of reserves needed for the financial system. He noted that the large amount of mortgage-backed securities held by the Fed in its past bond-buying activities continues to depress home borrowing costs. Given the current size of the Fed's mortgage-backed securities holdings, mortgage rates "are likely 75 to 100 basis points lower than they would have been."