Philadelphia Fed President Paulson: We need 'mildly restrictive' policy to bring inflation down

• The economy is strong with a stable labor market, but inflation remains too high.
• Current monetary policy is considered 'mildly restrictive' and is aimed at bringing underlying inflation down to 2%.
• Underlying inflation is estimated to be in the range of 2.4% to 2.8%, and further progress is needed.
• If progress on inflation is not made, the Fed is open to recalibrating monetary policy (e.g., higher rates or longer duration).
• Paulson supports reviewing Fed communication tools like forward guidance and the dot plot for internal consistency and effectiveness.

Philadelphia Fed President Anna Paulson assesses the current economic landscape, noting a strong economy and stable labor market, but persistent high inflation. She believes current monetary policy is 'mildly restrictive' and aims to bring underlying inflation down to 2%. Paulson indicates a willingness to recalibrate policy if inflation progress stalls, emphasizing the need to look through temporary supply shocks.