MNI BRIEF: Fed's Paulson Eyes Dec. Meeting With Caution

Philadelphia Federal Reserve Bank President Anna Paulson said Thursday she is taking a guarded approach to next month's decision on whether to keep cutting interest rates because borrowing costs are already close to neutral. 

"Each rate cut raises the bar for the next cut. And that’s because each rate cut brings us closer to the level where policy flips from restraining activity a bit to the place where it is providing a boost. So, I am approaching the December FOMC cautiously," she said in prepared remarks. 

"On the margin, I’m still a little more worried about the labor market than I am about inflation, but I expect to learn a lot between now and the next meeting." (See MNI INTERVIEW: High Bar For More Cuts As Neutral Nears-Kaplan)

Paulson said she expects the boost to inflation from tariffs will be temporary but would like to see evidence that this is the case. "So far, the evidence is consistent with this view, but it will take time to fully confirm or refute it."

She described the labor market data for September as "encouraging" despite the rise in the jobless rate to 4.4%, which Paulson argued is "still in the neighborhood of full employment."