Fed Chair Paulson backs push to bring inflation back to 2%

Paulson says the best that can be said about inflation is that it has not gotten worse, days after Powell said the Fed may need to raise rates again

Federal Reserve Chair Paulson said Thursday she supports doing what is needed to bring inflation back to the Fed's 2% target. She said the best that can be said about inflation right now is that it has not gotten worse.

Her comments follow the Fed's rate increase this month, the central bank's first since 2023. Powell said September inflation data drove that decision, and has said the Fed may need to raise rates again to curb inflation. Ahead of the meeting, Paulson herself said the balance of risks had shifted, and she has pointed to artificial intelligence as a possible driver of inflation rather than a disinflationary force.

Other officials have taken a similar tone. Bostic has said short-run inflation expectations are encouraging but long-term ones are not. Markets priced in two more Fed hikes after Barr's remarks. Hassett questioned the need for this month's increase, while Goolsbee's comments reinforced a hawkish consensus citing negative supply factors behind the inflation risk.

Paulson's remarks reinforce that hawkish stance without moving policy direction. With several officials already flagging that inflation remains above target and calling for more tightening, her commitment to the 2% goal restates a consensus rather than signaling a shift. Her description of inflation as having "not gotten worse" underscores how far the Fed still sees itself from its objective.