Philly Fed's Paulson signals more rate hikes ahead — SkimNews
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- Anna Paulson said some 'modest further tightening' of monetary policy may be warranted to return inflation to the Fed's 2% target, citing persistent underlying price pressures around 2.5%-3%.
- Federal Open Market Committee raised the benchmark interest rate to a target range of 3.75%-4% on September 17, a move Paulson said brings policy closer to what is needed to balance inflation and labor market risks.
- Underlying inflation has held steady at 2.5%-3% this year, 'well above' the Fed’s target, with Paulson noting it 'hasn’t gotten worse' but also showing little sign of closing the gap.
- Longer-duration Treasury yields have reached highs not seen since 2004 as market expectations for further Fed tightening increased, with traders pricing in a 64% chance of another hike in October.
- John Williams said earlier Thursday that it is 'reasonable' to expect another rate increase before year-end, reinforcing growing consensus among Fed officials about further tightening.
Why it matters: Markets now expect up to four quarter-point hikes by 2027, pushing implied rates to 4.8%, because Fed officials including Paulson and Williams are signaling ongoing tightening despite solid labor data—making borrowing more expensive than anticipated just months ago.
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