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Fed Rate Cuts Delayed: Paulson Cites Economic Watch
4 Jan
Summary
- Further rate cuts may be delayed as the Fed assesses economic performance.
- Philadelphia Fed President Anna Paulson expects inflation to moderate.
- Labor market is stabilizing, with growth projected around 2%.
Philadelphia Fed President Anna Paulson stated on Saturday that further interest rate cuts from the Federal Reserve could be some way off. Officials are pausing to evaluate the economy's performance following an active rate-cutting campaign conducted last year.
Paulson expressed cautious optimism, projecting that inflation will moderate and the labor market will stabilize. She anticipates economic growth to be around 2% for 2026. If these conditions materialize, she believes modest further adjustments to the federal funds rate might be appropriate later in the year. She noted that the current interest rate level remains somewhat restrictive.
Last year, the Federal Open Market Committee reduced its target interest rate by three-quarters of a percentage point through three separate 25 basis point moves. This brought the target range to between 3.5% and 3.75% by the December policy meeting. Officials navigated a delicate balance between curbing inflation and supporting a weakening job market, facing pressure from various stakeholders.
