Fed Official Backs Gradual Pace for US Interest Rate Hikes
Anna Paulson says wage pressures remain contained and inflation stays aligned with the central bank's 2% target.
Philadelphia Federal Reserve President Anna Paulson stated that monetary tightening should proceed gradually. She assesses that wage pressures remain limited at this time. Inflation expectations continue to be consistent with the 2% target established by the monetary authority.
Paulson emphasized that the pause in rate hikes reflects only a change in pace rather than a change in direction. She argues that a slow approach allows families and businesses to adjust to the new economic landscape. The additional time also allows policymakers to evaluate the latest data.
The official admitted that she could accelerate the process if she observes an increase in core inflation. She is closely monitoring evidence of intensifying wage pressures or unanchored expectations. Currently, the Fed maintains the benchmark interest rate in the range of 3.75% to 4%.
The internal debate at the Fed shows disagreements over the speed of monetary tightening. While Paulson prefers caution, other members suggest more significant hikes in December. Core inflation, which excludes energy and food, rose 0.3% in the latest report from the Bureau of Labor Statistics.
A more cautious stance from the US central bank may reduce upward pressure on the dollar and decrease volatility in global risk assets.
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