Philadelphia Fed’s Anna Paulson says more modest rate hikes may be needed to curb inflation

Philadelphia Fed President Anna Paulson said Thursday that the central bank may still need to raise interest rates further to bring inflation back toward its 2% target. Speaking a week after the Federal Reserve increased its benchmark rate by a quarter point, Paulson said price pressures have eased somewhat but remain too high. She said underlying inflation is still running around 2.5% to 3%, and that progress toward the Fed’s goal has been limited. Paulson said economic output remains solid and the labor market is holding steady, while noting that inflation has stayed elevated even after accounting for oil supply shocks and tariffs. Her comments came as traders increased bets on additional Fed tightening later this year and into 2027.