Policymakers should stop excluding food prices from core inflation for monetary policy outlook—KC Fed's Schmid

Seeking Alpha · 2026-07-16

"It is time to stop excluding food prices from core inflation," said Jeffrey Schmid, president and CEO of the Federal Reserve Bank of Kansas City. "I still think this is the right approach." Policymakers often refer to core inflation, inflation excluding

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Kansas City Fed President Jeffrey Schmid argued that the practice of excluding food prices from core inflation should be discontinued when determining monetary policy. As the volatility of food prices increasingly impacts consumer sentiment, he suggests that a more comprehensive inflation measure including food should be central to policy decisions. This signals potential changes in the Fed's interest rate framework and introduces a new variable to market inflation expectations.

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Financials — The likelihood of a prolonged high-interest-rate environment is expected to enhance net interest margins (NIM) and boost interest income for banks.

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Consumer Goods — If the inclusion of food prices in inflation metrics maintains higher inflationary pressure, a decline in household purchasing power could negatively impact sales for consumer goods companies.

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Schmid's remarks suggest a shift towards a more pragmatic inflation assessment. By incorporating food prices, which are highly visible and sensitive to consumers, the Fed may adopt a more restrictive stance for longer if food inflation remains persistent. This approach aims to better align policy targets with the reality of household expenditures, potentially altering the current path of interest rate adjustments.

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Policymakers should stop excluding food prices from core inflation for monetary policy outlook&#x2014;KC Fed's Schmid