MNI BRIEF: Fed's Paulson Sees Modest Rate Cuts Later In Year

The Federal Reserve could ease monetary policy modestly later in the year if inflation moderates and the labor market stabilizes as expected, Philadelphia Fed President Anna Paulson said Saturday. 

She expressed "cautious optimism" on inflation and said she wants "greater clarity on what is pushing growth up and employment down and whether these trends will continue," in remarks prepared for the Allied Social Science Associations Annual Meeting in Philadelphia. 

"Although I see labor market risks as somewhat elevated, my baseline outlook is pretty benign and does not take strong signal from Q3 growth or the recent uptick in the unemployment rate. I see inflation moderating, the labor market stabilizing and growth coming in around 2% this year. If all of that happens, then some modest further adjustments to the funds rate would likely be appropriate later in the year." (See: MNI: Fed Biased To Ease With Focus On Jobs - Ex-Officials)