Philadelphia Fed's Anna Paulson Signals Possible Further Rate Hikes
Paulson said inflation remains above the Federal Reserve's 2% target, even as economic output stays solid and the labor market holds steady.
Philadelphia Federal Reserve President Anna Paulson signaled Thursday that policymakers may raise interest rates further as inflation remains well above the central bank's 2% target, reinforcing a tighter policy outlook for U.S. markets.
The Federal Open Market Committee raised its benchmark rate by 25 basis points last week, bringing the target range to 3.75%-4%. Paulson said the move brought policy closer to the level she believes is needed, but added that additional modest tightening may be appropriate if economic conditions develop as expected.
Underlying inflation has remained between 2.5% and 3%, Paulson said, with little progress toward the Fed's target. Price pressures eased during the summer, but inflation has stayed elevated even after excluding effects from oil supply disruptions tied to the Iran war and tariffs.
Paulson described economic output as solid and the labor market as steady. Interest-rate futures currently indicate a 64% probability of another Fed hike in October, with another increase expected by some market participants in January. Futures also imply a policy rate near 4.8% by the end of 2027.
