Federal Reserve Bank of Philadelphia President Anna Paulson doesn’t believe that President Trump’s tariffs have contributed to rising prices and reiterated her support for interest rate cuts later this year if the job market stabilizes and inflation drifts toward the central bank’s target of 2%.
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“We’ve seen progress on underlying inflation that is likely to continue and there is no evidence to date that tariff-induced price increases are leading to broader inflation,” she said in prepared remarks for an economic event in Philadelphia on Wednesday. “In addition, long-term inflation expectations are anchored at levels consistent with a gradual return to 2 percent inflation.”
Paulson Says Restrictive Rates Help Ease Inflation
Paulson believes that current interest rates are “a little restrictive,” which will help guide inflation lower. Her base case in 2026 is for economic growth of 2%, falling inflation, and a stabilizing labor market. However, she highlighted that the effects of AI and deregulation could affect both inflation and employment.
Paulson acknowledged rising labor market risks, which influenced her to support 75 bps of rate cuts last year. The Fed is set to meet for its first Federal Open Market Committee (FOMC) meeting of 2026 on January 28, where it is expected to hold rates steady.
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