Philadelphia Pres Ann Paulson is on the wires saying
- Fed has made notable progress bringing inflation down
- Iran war creates risks for both growth and inflation
- Inflation levels still too high; expectations remain “fragile”
- No evidence the labor market is currently driving inflation
- Above-target inflation tied to AI-driven growth would complicate Fed response
- R-star estimate near Fed median (~3.1%)
- Unclear how much AI is boosting productivity so far
The tone from Paulson leans cautiously hawkish. Yes, there has been progress on inflation, but it’s still too high and expectations remain fragile — and that keeps the Fed on guard. Add in the uncertainty around how much AI is actually boosting productivity, along with geopolitical risks like the Iran situation, and it makes it harder for the Fed to confidently shift policy. While it’s somewhat reassuring that the labor market isn’t currently driving inflation, that alone isn’t enough to offset the broader concerns. Bottom line, this feels like a “not ready to ease” message, with a bias toward higher rates for longer rather than moving toward cuts anytime soon.
