Overview
- Philadelphia Fed President Anna Paulson said the current level of interest rates is appropriate and mildly restrictive, which she said is helping push inflation lower even with pressures from tariffs and the Middle East conflict.
- She said it is healthy that investors now price an extended hold or possible rate increases, a shift that keeps borrowing costs higher for longer for households and businesses.
- Paulson said rate cuts would require clear, tangible progress in lowering inflation and a job market that stays broadly in balance.
- In a later question-and-answer session, she described risks to inflation and growth as “super-elevated” and said a rate hike could be considered if growth runs above potential or new inflation threats emerge.
- Analysts expect the Fed to hold its policy rate at 3.50% to 3.75% at the June meeting, which will be the first chaired by Kevin Warsh.