Anna Paulson from the Fed Backs Further Rate Cuts, Downplays Trump Tariffs’ Impact on Inflation

Philadelphia Federal Reserve President Anna Paulson has taken a clear stance — the U.S. economy, in her view, needs further monetary easing, while fears over the impact of Trump’s tariffs are overstated. In her latest remarks, she sent a strong signal to investors and markets: more rate cuts are not only possible but also desirable.

Paulson Supports Continued Monetary Easing Speaking at the annual meeting of the National Association for Business Economics, Paulson stated that loosening monetary policy aligns with the Fed’s median projection and that the September 25-basis-point rate cut “made sense.”

That September meeting marked the first rate cut of the year, and most FOMC members already hinted that two more cuts could follow before year-end — a scenario Paulson now openly supports. “Progress in core inflation suggests that policy can remain accommodative,” Paulson said, adding that labor market risks are rising and that overall momentum is weakening. With these comments, she joins other Fed officials such as Michelle Bowman, Chris Waller, and Stephen Miran, who have advocated for more rate cuts amid signs of labor market cooling. Waller, however, recently cautioned against excessive speed, noting that “a gradual pace of 25 basis points at a time is a sensible approach.”

Trump’s Tariffs Unlikely to Cause Lasting Inflation Paulson also addressed the issue of Trump’s tariffs, which some analysts feared could raise import prices and fuel inflation. The Philadelphia Fed President believes, however, that the effect will be temporary and won’t have lasting consequences for inflation. “The price level may rise modestly in the short term, but I do not expect tariffs to permanently alter the inflation trajectory,” she explained.

She also pointed out that price increases have so far been milder than expected, undermining earlier FOMC concerns that had delayed rate cuts earlier this year. “A real problem would arise only if tariff-driven price growth became widespread,” Paulson added, “but current conditions do not point in that direction.”

Fed Prepares for the October Decision Markets are now pricing in another rate cut at the October 29 meeting, likely another 25-basis-point move. Such a step could further boost the ongoing rally in cryptocurrencies and stocks, both of which have recently benefited from expectations of cheaper capital. All eyes are now on Fed Chair Jerome Powell, who is set to deliver a speech tomorrow on the economic outlook and monetary policy, likely providing more insight into the FOMC’s stance on inflation and the labor market.

Summary Paulson’s remarks confirm that the dovish wing within the Fed is gaining strength, prioritizing labor market stability over temporary price spikes. If Powell echoes her tone, another rate cut will become almost certain — a scenario financial markets are already anticipating with growing optimism.

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