Philadelphia Fed President Paulson: We need 'mildly restrictive' policy to bring inflation down

Summary

Philadelphia Fed President Anna Paulson discusses the strong U.S. economy, a stable labor market, and inflation that remains too high, arguing that mildly restrictive monetary policy is needed. She weighs offsetting forces like the AI investment boom and a subdued housing market. Paulson is open-minded about future rate moves and shared her views on Fed communication tools like forward guidance and the dot plot.

• Economy remains strong with solid consumer spending and investment
• Labor market stable with wage growth consistent with 2% inflation
• Inflation still too high; underlying inflation estimated at 2.4-2.8%
• Housing market is very subdued, while AI buildout and stock markets are robust
• CEOs report difficulty passing price increases to consumers
• Paulson is keeping an open mind on rates; sees need for more progress on inflation before any recalibration
• She finds the dot plot useful internally but mixed as a market communication tool
• Paulson is open to considering changes like moving to six Fed meetings a year