Fed's Schmid says choice is between patience and rate hikes to tamp down inflation

By Howard Schneider

WASHINGTON, June 4 (Reuters) - Kansas City Federal Reserve President Jeffrey Schmid said on Thursday that the U.S. central bank's choice now is between being patient and holding interest rates steady or hiking rates to tamp down inflation that has been above target for years.

"The big question now is do we stay patient?" Schmid said at an economic forum in Oklahoma. "Our inflation numbers have probably crept up into the three and a half percent range, which nobody likes. Is it temporary...or do we act? Do we say, okay, now it's time to raise rates a quarter or two and see if we can't tamp this thing down?"

Schmid's comments reflect growing concern at the Fed that inflation that was initially pushed up by tariffs and oil prices - factors that were on their own considered likely to fade over time - is threatening to become a more persistent problem. Inflation has been above the Fed's 2% target for more than five years.

Schmid did not mention the possibility the Fed might cut rates, which had been the baseline outlook for many of his colleagues at the start of the year.

The Fed meets on June 16-17 and is expected to hold the policy rate steady in the 3.5% to 3.75% range where it has been since December.

(Reporting by Howard Schneider; Editing by Andrea Ricci )