Paulson Keeps Open Mind on Monetary Policy Amid High Inflation Pressures

Federal Reserve Bank of Philadelphia President Anna Paulson expressed her commitment to keeping an open mind regarding monetary policy, particularly in light of high inflation. She emphasized that the recent improvement in some inflation data is welcome but only a step towards achieving the central bank's target of 2% inflation while sustaining full employment.

Paulson stated that she will be closely watching the data to form her decision on monetary policy, adding that if underlying inflation remains stubbornly elevated, more restrictive policy may be needed. She supported the Fed's decision to hold its interest rate steady at between 3.5% and 3.75%, despite dissenting votes from three officials who voted in favor of a rate hike.

The persistence of inflation above target is a concern for Paulson, as she noted that underlying inflation is around 2.4% to 2.8%. She cautioned against using monetary policy to deal with supply shocks, citing the recent brief period of Middle East stability and the subsequent decline in oil prices as an example.