Philadelphia Fed President Anna Paulson warns of super-elevated risks to inflation and growth, leaving door open for rate increases.
Philadelphia Federal Reserve President Anna Paulson stated that risks to inflation and the economic outlook are “super-elevated,” with a rate hike possible if growth exceeds potential or inflation risks rise further. She noted current policy remains appropriate but acknowledged markets are pricing in potential hikes.
Paulson described the labor market as stable at full employment but unusual given elevated risks, warning a prolonged Iran conflict could heighten inflation and unemployment pressures. She emphasized the Fed’s reliance on multiple communication tools, including economic projections, to guide expectations.
While she refrained from altering the Fed’s recent policy language, Paulson highlighted uncertainty around artificial intelligence’s impact on productivity and inflation, indicating the Fed is monitoring developments closely but has not reached firm conclusions.