Fed's Paulson sees more rate cuts ahead to bolster job market

Core Viewpoint - The head of the Philadelphia Federal Reserve, Anna Paulson, advocates for more interest rate cuts to address rising risks in the job market, suggesting that trade tariffs will not significantly increase inflation as previously anticipated [1][2][6]. Group 1: Interest Rate Policy - Paulson emphasizes that monetary policy should aim to balance risks to maximum employment and price stability, advocating for a more neutral stance [2]. - The Federal Reserve recently reduced its benchmark overnight interest rate by 0.25 percentage points to a range of 4.00%-4.25%, with expectations of an additional 0.5 percentage point cut by the end of 2025 [4]. - Paulson supports easing measures in line with the Fed's recent forecasts, indicating a cautious approach to further rate cuts [3][4]. Group 2: Labor Market Concerns - There are noticeable increases in labor market risks, which Paulson believes should be the focus of monetary policy [3]. - Recent comments from Fed officials reflect a divide in opinions, with some concerned about the impact of tariffs on inflation and others advocating for stronger support for the job market [6]. Group 3: Inflation and Tariffs - Paulson acknowledges that while tariffs are expected to raise inflation, she does not foresee these effects being long-lasting [7]. - The current "modestly restrictive" monetary policy is seen as effective in mitigating inflation pressures, supported by stable long-term inflation expectations [7]. Group 4: Caution in Rate Cuts - Paulson warns against a rapid approach to cutting interest rates due to uncertainties regarding the neutral level of monetary policy [8].