Philadelphia Fed President Says December Rate Decision Being Approached with Caution

(Seoul=Yonhap Infomax) Ji Yeon Kim – Philadelphia Federal Reserve Bank President Anna Paulson stated that the Federal Open Market Committee (FOMC) is taking a cautious approach to its December policy decision.

Speaking at a Philadelphia Fed conference in Pennsylvania on the 20th (local time), Paulson said, "While I remain more concerned about the labor market than inflation, I expect to have more information by the next meeting."

She noted, "With each rate cut, the bar for further easing at subsequent meetings becomes higher," explaining, "As rates are lowered, Fed policy moves closer to stimulating the economy rather than restraining it."

Paulson assessed the U.S. economy as "doing fine," but pointed out that low- and middle-income households are facing challenges, while high-income households continue to spend.

"This means the economy is abnormally reliant on sustained demand from high-income groups, so the stock market could have a significant impact on growth prospects," she explained.

Paulson described the delayed release of September U.S. nonfarm payrolls—due to the government shutdown—as "encouraging."

She viewed the rise in the unemployment rate to 4.4%, the highest since October 2021, as a positive sign that slower job growth is aligning with a moderation in labor supply, indicating a broadly balanced labor market.

However, she cautioned that most job gains through September were concentrated in healthcare and social assistance, warning, "This could be a precursor to an economic slowdown."

On inflation, Paulson said, "The baseline outlook is that tariffs will not lead to persistent inflation," adding, "Slowing demand is helping to contain price increases."

Nonetheless, she expects inflation to remain above 2% over the next five years.

"With upside risks to inflation and downside risks to employment, monetary policy must be handled with great care," Paulson emphasized. "When considering policy from a long-term perspective, I will focus on appropriately balancing risks to inflation and the labor market."

She added, "It is my duty to achieve the FOMC's price stability goal and bring inflation back to 2%."

Paulson does not hold a voting seat on the FOMC this year but will be a voting member next year.

jykim@yna.co.kr

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