Key facts
- Philadelphia Fed President Anna Paulson said further gradual tightening seems appropriate for monetary policy.
- Paulson said monetary policy needs to be somewhat restrictive to bring inflation back to 2%.
- Paulson said underlying inflation pressures are running between 2.5% and 3%.
- Futures markets priced strong odds of a quarter percentage point increase at the December 8-9 FOMC meeting, per the report.
- Fed Governor Christopher Waller said a CPI reading like October's might push him to support a half percentage point increase.
Federal Reserve Bank of Philadelphia President Anna Paulson said on November 10 that the central bank has more interest rate increases ahead as it works to lower elevated inflation. In the text of a speech prepared for the 81st Annual Field Meeting Capstone gathering in Conshohocken, Pennsylvania, she said "further gradual tightening seems appropriate" for monetary policy.
Paulson, who holds a vote on the rate-setting Federal Open Market Committee this year, said gradual increases give the economy time to adjust to higher borrowing costs while giving Fed officials space to gauge the impact of their policy choices. "I continue to believe monetary policy needs to be somewhat restrictive to bring inflation back to 2 percent," she said, adding that underlying inflation pressures are running between 2.5% and 3% after price growth overshot the Fed's target for more than half a decade.
She said fighting inflation is her main priority in an economy that has shown unexpected strength and job market stability. She said inflation is being driven by tariffs, energy prices and AI investment, and that the October CPI report "suggests inflation pressures are still very much with us." She said her outlook could change, and that she "would want to act more quickly if inflation expectations drift up, if wage pressures build, or if underlying inflation moves higher."
The speech came as government data showed the overall consumer price index rose 0.4% in October, more than economists expected, according to the report. Several Fed officials took a firmer tone on the rate outlook after the release. Speaking before the data, Fed Governor Christopher Waller said a CPI reading like the one seen might push him to support a half percentage point increase in rates.
Futures markets priced in strong odds of a quarter percentage point increase at the Fed's December 8-9 meeting, according to the report, and traders also expect another increase at the late January gathering. The federal funds target rate stands between 3.75% and 4%.