Kansas City Federal Reserve Bank President Jeff Schmid stated that higher interest rates are necessary to achieve the central bank's price stability goals, reiterating that inflation remains his primary concern.

"Given strong demand and investment, I do not view the current stance of monetary policy as restrictive," Schmid said during a speech at an event in Omaha on Tuesday. "Therefore, I believe that bringing inflation down to the Fed's 2% target will require tightening monetary policy."

Federal Reserve officials are divided over how much force is needed to contain inflation, which has remained above the central bank's target for over five years. The war in Iran and massive investments in artificial intelligence (AI) are adding to upward price pressures.

Last week, the Fed held its benchmark interest rate steady. However, three officials dissented, voting for a 25-basis-point rate hike. They fear that delaying a rate increase now could raise the likelihood of more aggressive action in the future.

Schmid cautioned against assuming that inflationary pressures from supply shocks are merely temporary. He noted that such situations are more likely to cause a significant rise in inflation when demand is equally robust.

"I remain reluctant to assume that a surge in inflation is merely temporary," Schmid stated. "Ultimately, how long a surge in inflation lasts depends heavily on the Fed's response—or the market's expectations of that response."