Federal Reserve Outlook
Philadelphia — Federal Reserve Bank of Philadelphia President Anna Paulson stated on Saturday that additional central bank interest rate reductions may not occur immediately. She indicated that officials are evaluating economic performance following a period of rate easing last year.
Paulson delivered these remarks during a speech prepared for the 2026 Allied Social Science Associations Annual Meeting in Philadelphia.
Economic Projections
Paulson outlined her economic projections, noting, "I see inflation moderating, the labor market stabilizing and growth coming in around 2% this year." She added that if these conditions materialize, "some modest further adjustments to the funds rate would likely be appropriate later in the year."
Regarding the current policy stance, Paulson commented, "I view the current level of the funds rate as still a little restrictive," and affirmed its ongoing role in reducing inflationary pressures.
FOMC Context and Past Actions
Paulson is scheduled to be a voting member of the interest-rate setting Federal Open Market Committee (FOMC) this year. In the previous year, the FOMC implemented three separate rate reductions, each by 25 basis points, totaling a 0.75 percentage point decrease. This action set the central bank's interest rate target between 3.5% and 3.75% following the December policy meeting.
During that period, the committee's December meeting concluded with Federal Reserve Chair Jerome Powell providing limited specifics regarding the timeline for future rate cuts. However, Federal Reserve forecasts from that time suggested the possibility of further easing during the current year.
Inflation and Labor Market Assessment
Paulson expressed "cautious optimism on inflation" and a desire for "greater clarity on what is pushing growth up and employment down." She projected a "decent chance that we will end the year with inflation that is close to 2% on a run-rate basis," attributing this potential outcome to the completion of tariff-related price adjustments.
Regarding employment, Paulson characterized the labor market by stating, "While the labor market is clearly bending, it is not breaking." She further explained that the "broad deceleration in the labor market" appears to stem from both supply and demand dynamics, emphasizing the need for continued monitoring of the hiring situation throughout the year.