Philadelphia Federal Reserve President Anna Paulson told a fintech conference that the Fed may need to raise rates modestly again to bring inflation back to its 2% target. She made the remarks a week after the Federal Open Market Committee increased the benchmark funds rate by a quarter point, moving the target range to 3.75%‑4%.
Paulson said summer data showed some easing, but core inflation remains near 2.5%‑3%, well above the 2% goal, and the gap has shown little sign of narrowing. She added that underlying price pressures have not worsened despite the Iran‑related oil supply shock and tariff effects.
Outside of inflation, Paulson noted that economic output remains solid and the labor market is holding steady. The comments came as market participants have sharply raised expectations for additional Fed tightening. The CME Group's FedWatch tool now shows a 64% probability of another rate hike in October and further tightening in January.
Fed funds futures price the effective funds rate at about 4.8% by the end of 2027, implying up to four more quarter‑point increases. New York Fed President John Williams also said a further hike before year‑end is "reasonable."
