The newly appointed President of the Philadelphia Federal Reserve speaks out for the first time, supporting two more interest rate cuts this year
Anna Paulsen, President of the Federal Reserve Bank of Philadelphia, stated that she supports two more rate cuts this year, each by 25 basis points, and believes that monetary policy should overlook the short-term price increases caused by tariffs. She pointed out that the current monetary policy remains relatively tight, and further easing aligns with the Federal Reserve's economic forecasts. Although most committee members support rate cuts to bolster employment, some officials are cautious about inflation. Paulsen expects commodity prices to rise slightly in the future, but long-term inflation expectations remain stable. She warned that the foundation for economic growth is narrowing, with consumption relying on high-income household spending
According to the Zhitong Finance APP, Anna Paulson, President of the Federal Reserve Bank of Philadelphia, stated on Monday that she is inclined to implement two more rate cuts of 25 basis points each this year. She pointed out that monetary policy should "ignore" the short-term price increase effects caused by tariffs, as such shocks will not evolve into persistent inflation.
Paulson stated, "I do not see the conditions that would allow price increases triggered by tariffs to evolve into persistent inflation, especially in the current labor market environment."
She noted that the 25 basis point rate cut made by the Federal Reserve last month "was reasonable," and that the current monetary policy remains in a "moderately tight" state, thus further easing "aligns" with the direction of the Federal Reserve's latest Summary of Economic Projections (SEP). According to the median expectations in the September SEP, Federal Reserve officials expect two more rate cuts by the end of the year.
This is Paulson's first public discussion of the economic situation since taking office as President of the Philadelphia Fed in July. She stated that if the economic trajectory meets expectations, the policy adjustments this year and next will be sufficient to keep the labor market close to full employment levels.
Paulson pointed out that while the majority of members of the policy committee support further rate cuts to support employment, some officials remain cautious, believing that inflation is still above the 2% target, and that hasty easing could pose risks.
When discussing the inflation outlook, Paulson expects commodity prices to rise slightly in the coming quarters, but long-term inflation expectations remain stable, with no "worrisome spillover effects" observed. She also reminded that the recent slight increase in the unemployment rate indicates that the momentum in the labor market "is weakening."
Paulson stated that the U.S. economy is expected to maintain growth above trend in the third quarter, following a second quarter growth rate that exceeded market expectations. However, she warned that the growth foundation is becoming narrow, with consumption increasingly reliant on spending from high-income households, which to some extent benefits from the stock market boom driven by a few AI-related tech giants. "Some business contacts are beginning to worry about where future demand will come from," she said, "and this is something we need to closely monitor."
