At a Federal Reserve Bank of Philadelphia event, Governor Anna Paulson said monetary policy needs to be “somewhat restrictive” and that further gradual rate rises remain appropriate given high inflation. She added the Fed would move more aggressively if the inflation landscape worsens, while stressing the precise policy path depends on how the economy evolves. Paulson said gradual increases have given officials room to gauge the impact and allowed the economy time to adjust. Data, she said, show inflation remains a problem, with underlying inflation stuck between 2.5% and 3%, leaving the Fed with “more work to do”.
Market Reaction And Economic Conditions
The US Dollar Index (DXY) was consolidating hot Consumer Price Index (CPI)-inspired gains near 102.25 at the time of writing. A speech-scoring gauge put the message at 8.1/10, compared with a 7.6/10 historical average, while the FXS Fed Sentiment Index was unchanged with a 0.00-point move, holding at 145.28. Paulson also pointed to an economy stronger than expected and a job market described as robust and stable, while saying the effects of AI and energy on inflation are hard to gauge and risks to the inflation outlook remain high.
