Fed’s Paulson Keeping an ‘Open Mind’ on Interest Rates

Summary

Bloomberg's Michael McKee reports on Philadelphia Fed President Anna Paulson's essay explaining her 'open mind' on interest rates. She remains in the hold camp but is increasingly concerned that current policy may not be restrictive enough, citing sticky underlying inflation, subdued wage growth, elevated mortgage rates, and a muted housing market. She wants to see months of improving inflation data and contained tariff/energy pressures; otherwise, she may support a rate increase.

• Philadelphia Fed President Paulson published an essay keeping an open mind on rates
• She is in the hold camp but sees current policy as only mildly restrictive
• Underlying inflation is running between 2.4% and 2.8%, well above the 2% target
• Subdued wage growth, elevated mortgage rates, and a muted housing market are cited as concerns
• She wants months plural of declining inflation and contained tariff/energy pressures
• If inflation stays stubbornly elevated, she could line up to vote for a rate increase
• Two inflation reports will arrive before the next Fed meeting, potentially shaping her decision