Kansas City Federal Reserve Bank President Jeffrey Schmid warned that the Federal Reserve should not overlook the impact of surging energy prices, fueled by conflict in Iran, on inflation.

In prepared remarks for an event in Oklahoma City on Tuesday, Schmid stated, "This oil shock comes at a time when inflation has already been elevated for too long. Given that inflation is already hot, we should not assume now that the inflationary impact of rising oil prices is merely temporary."

Schmid indicated that rising oil prices could spill over into core inflation through items such as airfares and other transportation costs. He noted that price increases have consistently exceeded the Fed's 2% target over the past five years and expressed concern that the inflation rate might become stuck around 3%.

The Kansas City Fed president praised other aspects of the economy, pointing out that despite lower employment, economic growth and consumer spending remain strong. He suggested that while the oil price surge might slightly dampen economic growth, the economy is likely to absorb most of the shock from higher oil prices.

Schmid said, "There are many crosscurrents in the economy, with some factors pushing employment and inflation in opposite directions, requiring policymakers to make trade-offs as they pursue their dual mandate. In making these trade-offs, my current focus is more on the risks to inflation."

Federal Reserve officials held interest rates steady at their March 17-18 meeting. Following the meeting, Chairman Jerome Powell stated it was too early to assess the economic impact of the rise in energy prices. At that time, Schmid and other Fed officials expressed concern that soaring energy costs could push inflation higher.