At the National Association for Business Economics 67th Annual Meeting, Anna Paulson, President and CEO of the Federal Reserve Bank of Philadelphia, addressed the impact of tariffs on inflation. Paulson stated that “tariffs will increase the price level, but they won’t leave a lasting imprint on inflation.” She further noted that “monetary policy should look through tariff effects on prices.”
Paulson emphasized caution in her approach to policy decisions, saying she reached her conclusions “with an awareness that we need to be careful,” and would make policy decisions “cautiously.”
These remarks were Paulson’s first public economic outlook since assuming leadership at the Philadelphia Fed on July 1, 2025.
Paulson cited several reasons for her assessment, including stable inflation expectations, lower than anticipated price increases from tariffs, and businesses choosing not to pass increased costs onto consumers to retain market share.
She explained, “Given my views on tariffs and inflation, monetary policy should be focused on balancing risks to maximum employment and price stability which means moving policy to a more neutral stance.”
Paulson also commented on recent monetary policy actions. She said the Federal Open Market Committee’s September decision to cut rates by 25 basis points “made sense” due to growing labor market risks. For the rest of 2025, she sees “easing along the lines of the median SEP policy path as appropriate,” provided economic conditions develop as anticipated.
Looking forward to 2026, Paulson expects “growth near potential, and inflation rising and then subsiding as tariffs, together with current and past monetary policy restrictiveness, work their way through.” She added, “If the economy evolves as I expect, the monetary policy adjustments we make this year and next will be sufficient to keep labor market conditions close to full employment.”
The Federal Reserve Bank of Philadelphia is responsible for helping formulate and implement monetary policy, supervising financial institutions within its district, and providing financial services to depository institutions and government entities across eastern and central Pennsylvania, southern New Jersey, and Delaware. It is one of twelve regional Reserve Banks that operate alongside the Board of Governors in Washington D.C. as part of the Federal Reserve System.
