US Fed official backs current policy stance, says more rate hikes cannot be ruled out – Firstpost

The US Federal Reserve’s current monetary policy stance remains appropriate despite rising geopolitical and inflationary risks, but further interest rate hikes cannot be ruled out if price pressures worsen, Philadelphia Federal Reserve President Anna Paulson said on Wednesday.

Speaking at an Atlanta Fed conference in Amelia Island, Florida, Paulson said the Fed’s existing policy settings were helping contain inflationary pressures stemming from tariffs and the ongoing conflict in West Asia.

“Monetary policy is mildly restrictive and that restrictiveness is helping to keep the effects of both tariffs and the price increases associated with the conflict in the Middle East in check,” Paulson said in remarks prepared for delivery at the event.

“Taking these factors together, I believe the current stance of monetary policy is appropriate,” she added.

Her comments come at a time when investors are rapidly reassessing the outlook for US interest rates amid persistent inflation concerns tied to the Iran war, energy market disruptions, and elevated commodity prices.

Markets had entered 2026 expecting the Fed to begin cutting rates as inflation eased. However, escalating tensions in West Asia and fears of prolonged supply disruptions around the Strait of Hormuz have forced traders to rethink those expectations.

Paulson said recent market reactions largely aligned with her own assessment of the economy and policy risks.

“The way the market has moved in reaction to economic news over the last few months largely aligns with my own thinking,” she said.

While stressing that she believes policy is currently “in a good place”, Paulson also said it was reasonable for markets to consider scenarios where rates remain elevated for a prolonged period or move even higher.

“I think it is healthy that market participants have taken on board scenarios where the funds rate remains unchanged for an extended period, as well as scenarios where further tightening becomes necessary,” she said.

Her remarks reinforce the growing shift inside financial markets from expectations of aggressive rate cuts toward a “higher-for-longer” interest rate environment.

The Fed is widely expected to leave rates unchanged in the 3.5 per cent to 3.75 per cent range at its June policy meeting. The meeting will also mark the first chaired by incoming Fed Chair Kevin Warsh, who is scheduled to be sworn in later this week.

Despite acknowledging elevated inflation risks, Paulson downplayed fears of runaway price growth, saying long-term inflation expectations remained relatively well anchored and economic growth was still running near its estimated potential.

Her comments also came as global bond markets remained under pressure. Treasury yields have surged sharply in recent sessions, with 30-year US bond yields climbing to levels last seen during the lead-up to the 2007 global financial crisis.

Meanwhile, gold prices held near recent losses as investors increased bets that central banks may keep rates elevated for longer. Bullion traded around $4,480 an ounce after dropping nearly 2 per cent on Tuesday amid rising yields and inflation fears linked to the Iran conflict.