Paulson Calls for Further Rate Hikes as Inflation Remains Above Target

Philadelphia Federal Reserve Bank President Anna Paulson suggests that further interest rate hikes may be necessary to bring inflation back to its target of 2%. Speaking at a fintech conference in her district, she noted that while price pressures eased somewhat over the summer, core inflation remains above target at around 2.5-3%.

Paulson stated that if conditions evolve as expected, 'some modest further tightening may be warranted'. This comes after the Federal Reserve raised the benchmark rate by 0.25 percentage points to a range of 3.75-4%, which is already considered high.

New York Federal Reserve Bank President John Williams also expressed support for another rate hike before the end of the year, calling it 'reasonable' to expect one more increase.

Traders put the probability of another rate hike in October at 64% and expected another move in January, with federal funds rate futures contracts implying a rate of 4.8% at the end of 2027, corresponding to expectations of four quarter-percentage-point hikes.