By Michael S. Derby
Sept 24 (Reuters) – Philadelphia Federal Reserve President Anna Paulson said on Thursday additional interest rate hikes may be needed to bring high inflation back to the US central bank’s 2% target.
Inflation “remains stubbornly elevated,” Paulson said in the text of a speech to be delivered at an event at her regional Fed bank. “Returning inflation to 2% is a top priority, and I will support the policy path that gets us there while carefully weighing risks to the labor market along the way.”
Paulson, who is a voting member of the central bank’s rate-setting Federal Open Market Committee, said “looking ahead, if conditions evolve as I expect, some modest further tightening may be warranted” to help get inflation back to the desired levels.
The comments were her first since the U.S. central bank last week raised its benchmark overnight interest rate by a quarter of a percentage point to the 3.75%-4.00% range in a bid to lower inflation.
Paulson said she supported the tightening, noting that “the balance of risks had shifted” going into last week’s meeting and “underlying inflation showed little to no progress.”
Fed policymaker forecasts released at the meeting penciled in an additional rate hike before the end of this year, although futures markets expect significantly more rate increases.
The central bank is trying to lower inflation amid ongoing pressure from a variety of factors, including President Donald Trump’s import tariffs and surging energy prices generated by the US-Israeli war with Iran.
Paulson said strong investment in the technology sector is also helping to drive up inflation.
“Underlying inflation is running in a range of about 2.5 to 3%” and “the best I can say about underlying inflation this year is that it hasn’t gotten worse,” she noted.
Paulson described the economy as performing pretty solidly.
“I see a resilient economy that is showing some signs of increased momentum,” she said. “Despite shocks from tariffs and the conflict in the Middle East, recent consumption growth has been strong, the AI buildout is driving investment, and the labor market is stable.”
(Reporting by Michael S. Derby; Editing by Paul Simao)
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