Philadelphia Fed President Anna Paulson said modest further rate hikes may be warranted if conditions evolve as she expects. After last week’s Fed hike, she said underlying inflation showed no sign of easing and the risk of persistently high inflation had increased.
Paulson said tariff-related price pressures had eased, while pressures tied to the Middle East conflict and AI build-out had increased. She described the economy as resilient, citing strong consumer spending, AI-driven investment and a stable labor market; the recent hike, she said, moves policy closer to returning inflation to 2% while balancing labor-market risks.
New York Fed President John Williams said AI demand was driving inflation in some sectors, but he saw no broad cyclical imbalance; he called another hike by year-end a reasonable possibility while saying the data had not suddenly changed. Fed governor Michael Barr said Wednesday that further hikes were needed. Markets put the odds of a second hike in October above 60%, according to CME Group.
