Fed’s Anna Paulson keeps open mind on interest rates, says policy is ‘in a good place’

Anna Paulson, President and CEO of the Federal Reserve Bank of Philadelphia, told attendees at the Atlanta Fed’s Financial Markets Conference on May 19 that the current federal funds rate of 3.5% to 3.75% is “in a good place.” She also made clear she’s not committing to any particular direction on rates, preferring to let inflation data do the talking. Paulson’s keynote emphasized a data-dependent approach. She wants to see clear trends in underlying inflation and labor market dynamics before supporting any move on rates. She also explicitly stated that markets should be pricing in both an extended hold and the possibility of further tightening. Her longer-run estimate for the neutral rate, sometimes called R-star, sits at approximately 3.1%. That’s roughly in line with the Summary of Economic Projections median. She noted that productivity gains, particularly from artificial intelligence, could push that neutral rate higher over time. Back in January 2026, Paulson had implied that modest rate cuts might be appropriate later in the year under an optimistic economic scenario. The fact that we’re now in late May with rates unchanged and her tone shifting toward “keep an open mind” su...