Philadelphia Fed's Anna Paulson sees long-run federal funds rate at about 3.1%
View original at seekingalpha.comPhiladelphia Fed's Anna Paulson sees long-run federal funds rate at about 3.1% [Philadelphia] Hardikkumar Joshi Philadelphia Federal Reserve Bank President Anna Paulson sees the long-run federal funds rate closer to the SEP median of 3.1%…
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When talking to businesses, there is genuine enthusiasm about AI but also cautious implementation, with big productivity effects likely to mostly lie ahead
60% confidenceInflation has been above the 2% target for six years, and while significant progress has been made, inflation is still 2.8%, not 2%
60% confidenceThe labor market is relevant for evaluating a surge in growth; if unemployment is high, there is more room to be patient, but near full employment makes the calculus trickier
60% confidenceThe bar for interest rate hikes is quite high as growth slows
60% confidenceUnder a medium-productivity scenario, the federal funds rate would be higher at around 3.1%
60% confidenceIn January, she still felt cautiously optimistic on inflation after the latest data and reiterated her view for additional interest-rate cuts later in 2026
60% confidenceThe conflict in the Middle East has created new risks to both inflation and growth
60% confidenceThe long-run federal funds rate is closer to the SEP median of 3.1%
60% confidenceIran conflict complicates demand, labor, and inflation outlook
60% confidenceWhen productivity growth is higher, there are more investment opportunities and stronger demand for capital, putting upward pressure on interest rates
60% confidenceThe economic position today is different from January
60% confidenceUnder a high-productivity scenario, the federal funds rate would be at the upper end of the SEP's central tendency at 3.5%
60% confidenceLong-term inflation expectations are consistent with 2%, but they may also be a little more fragile
60% confidenceTrends in labor market momentum and wage growth can provide valuable signals about the extent to which a surge in growth is creating inflationary pressures
60% confidenceUnder a low-productivity scenario, the federal funds rate would be relatively low at around 2.5%, similar to pre-pandemic levels
60% confidence