Fed's Paulson backs gradual rate hikes to curb inflation

Philadelphia Fed President Anna Paulson said Tuesday the central bank must continue raising interest rates to combat persistent inflation, calling further gradual monetary tightening appropriate. Paulson stated policy needs to remain "somewhat restrictive" to bring inflation back to the 2% target, as price pressures have exceeded it for over five years, with core inflation between 2.5% and 3%. She cited tariffs, energy prices, and AI investments as drivers. A voting FOMC member this year, Paulson prioritized fighting inflation amid unexpected economic strength and a stable job market. Markets see an 88.8% chance of a 25-basis-point rate hike in December, following September's first increase in three years.