Anna Paulson Backs Fed Rate Cuts, Downplays Tariff Impact

Federal Reserve Bank of Philadelphia President Anna Paulson has shared her thoughts on the economic outlook, while backing more Fed rate cuts this year. She also opined that the Trump tariffs won’t have a lasting impact on inflation, just as some Fed officials have also stated. The market continues to price in another rate cut this month, which has contributed to the current bullish momentum for crypto prices.

Anna Paulson Signals Support For More Fed Rate Cuts

The Fed president said during the National Association for Business Economics Annual Meeting that she views easing along the lines of the median Summary of Economic Projections policy path as “appropriate.” She also declared that the FOMC’s decision to cut rates by 25 basis points (bps) in September “made sense.”

As CoinGape reported, the Fed cut rates for the first time this year at the September FOMC meeting. As part of the meeting, most officials indicated they expect to make two additional 25-bps Fed rate cuts this year, which Paulson has said she supports.

The Philadelphia Fed President explained why she supports two more cuts this year, alluding to the progress on underlying inflation. She further noted that the labor market risks appear to be rising and that momentum is going in the wrong direction.

With this, Paulson joins other Fed officials, including Governors Michelle Bowman, Chris Waller, and Stephen Miran, who have advocated for additional Fed rate cuts this year due to the weakening labor market. However, Chris Waller recently urged caution on the pace of the cuts, while indicating that 25 bsp cuts were just fine amid calls for larger cuts.

Trump Tariffs Won’t Have Lasting Imprint

Paulson stated that her base case is that the Trump tariffs will increase the price level, but that they won’t leave a lasting imprint on inflation. She added that based on this base case, monetary policy should look through tariff effects in prices.

This came as she admitted that the tariff-induced price increases have been smaller than they anticipated. The Trump tariffs had been one of the reasons why the FOMC was skeptical about making Fed rate cuts earlier in the year.

The Fed president also mentioned that it would be a problem if the tariff-induced price increases spilled over to inflation more generally. However, she doesn’t see “conditions as supporting problematic spillovers.”

As more officials continue to voice support in favor of more Fed rate cuts, it looks more than likely that the FOMC will make another cut at the October 29 meeting. Fed Chair Jerome Powell will deliver a speech tomorrow on the economic outlook and monetary policy and will likely provide more insights into where the committee currently stands on their dual mandate of inflation and the labor market.