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Economic Growth · Geopolitics · Inflation · Monetary Policy
Philadelphia Federal Reserve President Anna Paulson stated on Friday that the ongoing Iran war presents new risks to both inflation and economic growth for the U.S. economy, indicating the central bank will maintain a cautious monetary policy stance given inflation remains above its 2% target.
Paulson, speaking at a San Francisco Fed event, highlighted that inflation has persistently exceeded the U.S. central bank’s 2% target despite "significant progress" in reducing price pressures. She noted that longer-run inflation expectations are "consistent" with the 2% goal but are "a little more fragile." Paulson explained that if inflation were at the 2% target, the Fed would feel more comfortable being patient with monetary policy, even with potential AI-driven productivity gains.
However, with inflation above 2% for an extended period, she stated the Fed "would be more cautious" and "inclined to weight the possibility of overheating more heavily in determining appropriate policy."
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The Richmond Fed president said holding interest rates steady in March was the right move amid a long stretch of elevated uncertainty.
