Philadelphia Fed President Anna Paulson said further modest tightening of monetary policy may be needed if economic conditions unfold as she expects, after she supported raising the federal funds rate target range by 25 basis points to 3.75%-4.00% at last week's FOMC meeting. Speaking Thursday at the Philly Fed's 10th Annual Fintech Conference, Paulson said the Fed's benchmark rate does not appear to be lowering inflation that has remained above the central bank's 2% goal for more than five years. She pointed to upward pricing pressures from tariffs and the AI buildout, noting that by September it was clear inflation risks were growing and underlying inflation showed little to no progress. Paulson, who votes on the Federal Open Market Committee this year, said the risk of persistently elevated inflation had increased as economic growth firmed up a little and the labor market strengthened a touch. She said she will keep watching the data and listening to businesses and workers, adding that returning inflation to 2 percent is non-negotiable.
Paulson backed a 25bp hike to 3.75%-4.00% and said further modest tightening may be needed, pushing the policy rate higher.
Hawkish Fed stance and further tightening expectations lift the 10Y Treasury yield (bond prices fall).
