US FOMC Member Paulson Speaks

FED'S PAULSON SAYS INFLATION ISSUES ARE AFFECTING THE ECONOMY. FED'S PAULSON SAYS MONETARY POLICY IS CURRENTLY AT A MILDLY RESTRICTIVE LEVEL. FED'S PAULSON STATES INFLATION REMAINS EXCESSIVE AND WAS HIGH PRIOR TO THE WAR. Fed's Paulson: Consumers are spending but at a slower pace PAULSON SAYS IT'S GOOD FOR MARKETS TO MOVE TOWARD TIGHTER MONETARY POLICY.

PAULSON: RISKS ARE "SUPER-ELEVATED" RIGHT NOW TO BOTH INFLATION AND THE OUTLOOK FED'S PAULSON: RIGHT HIKE MIGHT BE CONSIDERED IF GROWTH MOVES ABOVE POTENTIAL OR OTHER INFLATION RISKS EMERGE

Good evening. Thank you, Colby, for that kind introduction. It's great to be here. As many of you know, Congress has given the Federal Reserve and specifically the Federal Open Market Committee the job of delivering stable prices and maximum employment for the American people. I am focused on understanding economic conditions and where they are headed — so that we can position monetary policy to achieve those goals. My team and I spend a lot of time analyzing data and listening to people. We talk to households across the economic spectrum, firms of every size and sector, nonprofits, and a wide range of financial institutions. These conversations tell the stories behind the data and provide a glimpse into the future, since the plans we hear about are not yet reflected in official statistics. The people behind these conversations — employers, workers, families and their communities — are at the forefront of my mind when I'm making monetary policy decisions. Right now, these conversations reflect strain and uncertainty. Inflation is taking a toll. Many families are struggling to make ends meet, especially with the jump in gas prices. Workers are anxious about the job market, both those seeking employment and those worried about keeping their jobs as artificial intelligence (AI) reshapes the workplace. Businesses are navigating enormous change: tariffs, evolving regulations, and now the conflict in the Middle East. All of this is creating opportunity but also disruption. Paulson says current Fed policy appropriate but markets right to price in hikes

Thank you for the invitation to join you today. It's great to be at the San Francisco Fed and to be part of this conversation. I’m going to focus today on a question that is on my mind as a policymaker and that elicits strong and wide-ranging views. What might the rapid advance of artificial intelligence (AI) mean for the U.S. economy, and what does it mean for monetary policy? Is AI more than hype? At the Children's Hospital of Philadelphia, AI systems are transforming pediatric care. AI tools help diagnose rare diseases and can predict patient decline hours before more traditional methods. They also allow for treatment protocols that are personalized in ways that would have been impossible just a few years ago. But our relationship with technology is complicated. Some people embrace it, and others not so much. The Children’s Hospital of Philadelphia is just a few miles away from the place where “hitchBOT” met an untimely end back in 2015. HitchBOT was a cute, hitchhiking robot designed to explore how people relate to technology. He had successfully hitchhiked across Canada and parts of Europe before being decapitated in downtown Philadelphia. You don't have to look far to find passionate views on AI and the future of the economy. Some of my business contacts tell me AI will fundamentally transform their operations — changing not just how they produce, but what it is possible to produce. Others are more skeptical. They expect AI tools to produce incremental improvements rather than revolutionary changes. These perspectives matter far beyon Fed's Paulson: The Fed has made notable progress in bringing inflation down. *PAULSON: NO SIGN LABOR MARKET CONTRIBUTING TO INFLATION *PAULSON: LONG-TERM INFLATION EXPECTATIONS MAY BE MORE FRAGILE Just in | Fed's Paulson Warns Iran Conflict Poses Risks to Economic Growth and Inflation.

The full mosaic (Slide 2) • The U.S. economy is complex — millions of households, workers, firms, and institutions interacting daily to produce, trade, and consume billions of dollars of goods and services. • The true state of all of this economic activity exists, but we only observe fragments. Individual data points are like tiles in a mosaic: the challenge for policymakers is to assemble the pieces to understand both current economic conditions and where they might be headed. Choosing the tiles (Slide 3) • Tiles represent different data points. They come from a lot of different data sources. The job of policymakers is to put them all together. • Some of the tilemakers are well established — i.e., the official statistical agencies. They have long series and are reliable, and it is well understood how their tiles are made. There are also newer tilemakers — the private sector data sources. • We can also create tiles, like the Beige Book, regional Federal Reserve Bank surveys, as well as insights that come from conversations with business and community contacts. Some of these data are tailored to the important issues of the day. Fed's Paulson does not comment on monetary policy and economic outlook.

Good morning! And thank you for that kind introduction. It’s great to be here with you. I’d like to thank Chellie1 and the Chamber team for the invitation to speak today. The Chamber and the Philly Fed have a long-standing and important partnership on many programs and that includes the annual Chamber State of the Economy survey that many of you will have filled out. Your input helps us understand the economy and the range of ways organizations and individuals are experiencing and shaping it. You provide the stories behind the data that are a key input into my thinking about monetary policy. My goal today is to leave you with a sense of the important national economic trends and how those trends are playing out here in Philadelphia. I’ll also share some findings from a recent survey that our team did to identify barriers to employment for Philadelphia residents. I hope this will provide good background for the panel discussion focusing on opportunities to create great jobs here in the region. Before I get into the details, please note that I am speaking just for myself and that my views don’t necessarily reflect those of any of my Federal Open Market Committee (FOMC) colleagues. Economic Outlook As many of you know, Congress has charged the FOMC with delivering maximum employment and price stability. We define price stability to mean inflation of two percent, as measured by the change in the personal consumption expenditure price index, affectionately know Fed's Paulson: Sees further rate cuts later this year if forecast met. FED’S PAULSON: INFLATION SHOULD BE AROUND 2% RUN RATE BY YEAR END FED’S PAULSON: MONETARY POLICY IS ‘A LITTLE RESTRICTIVE’ RIGHT NOW FED’S PAULSON: IS CAUTIOUSLY OPTIMISTIC ON INFLATION MOVING BACK TO TARGET Fed's Paulson: The US is likely to grow around 2% this year.

Thank you for having me today.1 It’s great to be with all of you and I am honored to join my fellow panelists. January is a good time to take stock and to think about what lies ahead. I’d like to provide an overview of how I see economic developments in the U.S. and some of the themes that I think will be important for monetary policy this year. Before I get into my remarks, please note that I am speaking just for myself and these are my views and not necessarily those of my Federal Open Market Committee (FOMC) colleagues. Let me start with inflation. If I had to pick a theme for inflation for 2026 it would be “cautious optimism.” We recently received inflation data for November of last year, but the lack of data collection during the government shutdown complicates the interpretation of those data, so I am going to focus on data through September of 2025. Breaking | Fed Chair Paulson emphasizes that the labor market is a more reliable indicator than GDP data. $JPM $BAC Philly Fed's Paulson sees room for interest rate cuts later this year if inflation eases Just in | Fed's Paulson predicts completion of tariff price adjustments within the next six months.