Philadelphia Fed's Anna Paulson says 'modest' rate moves likely ahead to tame inflation

The Philadelphia Federal Reserve's Anna Paulson has indicated that additional interest rate hikes may be necessary to combat persistent inflation, according to Reuters. Speaking at a regional Fed bank event, Paulson stated that "inflation remains stubbornly elevated" and that returning it to the central bank's 2% target is a top priority.

As a voting member of the Federal Open Market Committee, she suggested that "some modest further tightening" could be appropriate in the coming months. This comes in the wake of the Fed raising its benchmark overnight interest rate by a quarter-percentage point last week, bringing it to a range of 3.75%-4.00%. Paulson added her support to the increase, noting that "the balance of risks had shifted" and that "underlying inflation showed little to no progress" prior to the meeting.

She further cautioned that while the US economy remains relatively strong, with strong consumption growth and stable labor market, the factors contributing to inflation, such as tariffs and surging energy prices, continue to pose challenges.