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Fed’s Paulson warns more rate hikes may be needed to tame inflation

Paulson said the September hike helped shift policy toward a more inflation fighting posture.

Reported · Written up by our desk · Central Banks

Philadelphia Fed President Anna Paulson said additional rate hikes may be needed to bring inflation down, signaling that the US central bank’s inflation fight could require more tightening. Paulson pointed to the September rate hike as an inflection, saying it helped move policy toward a posture better aligned with lowering inflation.

The remarks were made in the context of how US monetary policy works through the Federal Reserve, which uses interest rate adjustments to support its dual mandates of price stability and full employment. When inflation is above the Fed’s 2% target, higher rates increase borrowing costs across the economy and tend to strengthen the US dollar, according to the framework outlined in FXStreet’s writeup.

FXStreet also noted that the Fed holds eight policy meetings a year through the FOMC, which assesses economic conditions, and that it has used non standard measures like quantitative easing in past extreme situations, a policy that typically weakens the US dollar.

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