Key facts
- Philadelphia Federal Reserve President Anna Paulson said additional interest rate hikes may be needed to bring high inflation back to the US central bank's 2% target.
- Paulson stated that inflation "remains stubbornly elevated" and returning it to 2% is a top priority.
- She indicated that "some modest further tightening may be warranted" if conditions evolve as she expects.
- Paulson supported the Fed's recent quarter-percentage-point rate increase, noting that the balance of risks had shifted and underlying inflation showed little to no progress.
- Underlying inflation is running in a range of about 2.5% to 3%, and has not gotten worse this year, Paulson said.
- Paulson described the economy as performing solidly with signs of increased momentum, citing strong consumption growth, AI-driven investment, and a stable labor market despite tariffs and Middle East conflict.
Philadelphia Federal Reserve President Anna Paulson said on Thursday that additional interest rate hikes may be needed to bring high inflation back to the US central bank's 2% target. Paulson, a voting member of the Federal Open Market Committee, described inflation as "stubbornly elevated" and returning it to 2% as a top priority, stating she would support the policy path that achieves this while carefully weighing risks to the labor market.
In her first comments since the Fed last week raised its benchmark overnight interest rate by a quarter of a percentage point to the 3.75%-4.00% range, Paulson said she supported the move. She noted that the balance of risks had shifted and underlying inflation showed little to no progress. Fed policymaker forecasts released at the meeting suggested one more rate hike before year-end, though futures markets anticipate more increases.
Paulson cited President Donald Trump's import tariffs and surging energy prices from the US-Israeli war with Iran as factors contributing to inflation, along with strong investment in the technology sector. She estimated underlying inflation is running between 2.5% and 3%, noting that it "hasn't gotten worse" this year. Paulson characterized the economy as performing solidly with increasing momentum, supported by strong consumption growth, AI buildout driving investment, and a stable labor market.