The Federal Reserve Bank of Philadelphia published prepared remarks by President and CEO Anna Paulson setting out her first economic outlook since taking office, arguing that tariffs will lift the price level but are unlikely to generate persistent inflation. On that basis, she said monetary policy should look through tariff-driven price effects and instead focus on balancing risks to maximum employment and price stability, implying a move toward a more neutral policy stance. Paulson pointed to anchored inflation expectations, smaller-than-expected price increases from tariffs, and firms absorbing cost increases to maintain market share as factors supporting her assessment. She said the Federal Open Market Committee’s 25 basis point rate cut in September was appropriate given rising labor market risks, and she would view further easing in line with the median SEP policy path as appropriate for the remainder of 2025 if conditions evolve as she expects. For 2026, she expects growth near potential and inflation to rise and then subside as tariffs and current and past monetary policy restrictiveness work through the economy, while noting policy decisions would be made cautiously.
Federal Reserve Bank of Philadelphia 2025-10-13
Federal Reserve Bank of Philadelphia’s Paulson says tariffs will raise the price level but not leave a lasting imprint on inflation
Federal Reserve Bank of Philadelphia President Anna Paulson delivered her first economic outlook, stating tariffs will raise prices but likely won't cause persistent inflation, suggesting a neutral monetary policy stance. She supported the Federal Open Market Committee's recent rate cut due to labor market risks and indicated further easing might be appropriate if conditions align with expectations. For 2026, Paulson anticipates growth near potential and inflation fluctuations as tariffs and monetary policy effects unfold, with cautious policy decisions.