Fed’s Paulson: Comfortable holding rates; labor risks "a little bit higher" vs inflation

In an interview with the WSJ, Philadelphia Fed President Anna Paulson stated that she is "comfortable holding interest rates steady" at the upcoming January 27-28 meeting. She also mentioned that there is no immediate rush to cut rates again, which is implied by the market pricing at 40% through May. Paulson believes the current rate range is "slightly above a neutral level," and maintaining restrictiveness for now is appropriate to tackle inflation. She highlighted the importance of January price data, noting that business owners are reluctant to raise prices due to fears of losing market share. Paulson warned that the labor market could deteriorate quickly and emphasized her keen focus on any signs of weakness. Looking ahead, she may favor modest rate cuts later this year if inflation data aligns with her expectations or if the labor market unexpectedly weakens. Overall, her comments reflect a careful balance of maintaining current rates while acknowledging potential labor market risks.