Philadelphia Fed President and CEO Anna Paulson said the Federal Reserve should continue tightening gradually, citing inflation above its 2% target while leaving the pace contingent on economic conditions.
At the Philadelphia Fed’s 81st Annual Field Meeting Capstone on Tuesday, Nov. 10, Paulson said “further gradual tightening seems appropriate.” She backed September’s rate increase and the Oct. 28 decision to hold rates, calling a skipped meeting “a matter of pace, not direction.”
The Federal Open Market Committee (FOMC) kept its target range at 3.75% to 4.00% in a 10-2 vote on Oct. 28. Two members preferred a quarter-point increase. Paulson’s remarks did not commit the committee to another increase; its October statement said it needed more information to determine the appropriate policy stance.
The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) for all urban consumers rose 0.4% in October from September, after a 0.6% increase the previous month. The index excluding food and energy gained 0.3%. Missing October 2025 data prevented the BLS from publishing October 2026 12-month percentage changes for affected indexes.
Paulson said underlying inflation measures had remained between 2.5% and 3%. Headline personal consumption expenditures (PCE) inflation was 3.6% over the 12 months through September. She pointed to tariffs, energy prices and the artificial intelligence buildout as sources of price pressure. Tariff effects appeared to be fading, she said, while energy supply and AI-related demand were harder to assess.
Paulson said a gradual pace gives households time to adjust their budgets and businesses time to reconsider borrowing and investment. It also gives banks, particularly community banks, time to manage funding costs, loan pricing and borrowers’ ability to repay. Tighter policy raises borrowing costs, she said. She would consider moving faster if inflation expectations rose, wage pressures built or underlying inflation increased, but said she was not seeing those conditions at the time of her speech.
The BLS is scheduled to release October producer-price data Friday, Nov. 13, at 8:30 a.m. ET. The FOMC’s next meeting is scheduled for Dec. 8-9.
