Philadelphia Fed: Further Interest Rate Hikes May Be Needed to Defeat Inflation

Philadelphia Federal Reserve President Anna Paulson said Thursday that “further interest rate hikes may be needed” to bring inflation back to the U.S. central bank’s 2 percent target.

These were Paulson’s first public comments since last week’s decision to raise rates by 0.25 percentage points, taking the target range to 3.75–4.00 percent.

“Inflation remains stubbornly high,” she said in the speech, adding that core inflation is running “at around 2.5 to 3 percent”. “The best thing I can say this year is that it has not gotten worse,” she said.

The Federal Reserve has signaled there could be another hike before the end of the year, while financial markets are expecting even more monetary tightening.

Inflationary pressures are coming from the Trump administration’s import tariffs, rising energy prices due to the U.S.–Israel war with Iran, as well as strong investment in the technology sector, particularly in artificial intelligence.

Paulson described the U.S. economy as “performing quite well”, with strong consumption, AI-driven investment and a stabilized labor market.

Source: Reuters