Philadelphia Fed President Anna Paulson said further gradual rate hikes are appropriate to bring inflation back to 2%. October consumer prices rose 0.4%, and futures markets priced in strong odds of a quarter-point increase at the Fed’s Dec. 8-9 meeting.
Paulson said further gradual monetary tightening seems appropriate, while the exact path will depend on how conditions evolve. She said policy needs to be somewhat restrictive to return inflation to 2%, and that gradual increases give the economy time to adjust while allowing officials to assess their effects.
Paulson said October’s consumer price index report suggested inflation pressures remained, citing tariffs, energy prices and AI investment as drivers. The overall CPI rose 0.4% in October. Futures markets priced in strong odds of a quarter-percentage-point increase at the Dec. 8-9 meeting, with traders also expecting another increase in late January. Paulson said she would want to act more quickly if inflation expectations drifted up, wage pressures built or underlying inflation rose.
