Philadelphia Federal Reserve President Anna Paulson said she is approaching December’s policy meeting “cautiously,” arguing that the Fed must carefully balance slowing labour momentum against lingering inflation risks. Paulson backed the most recent rate cuts but warned that “each cut raises the bar for the next one” as policy moves closer to providing economic stimulus rather than restraint.

Paulson, who will not vote at the December 9–10 meeting but rotates into a voting seat in 2026, said she remains marginally more concerned about the job market than inflation. She described the September payrolls report as “encouraging,” noting that slower job gains appear broadly aligned with a cooling labour supply. Still, the concentration of hiring in healthcare and social services, she said, is often a sign of late-cycle dynamics.

She noted that lower- and middle-income households are under strain while higher earners continue to spend, leaving growth unusually reliant on wealthier consumers and more sensitive to equity-market swings. On inflation, Paulson said tariff effects have been smaller than feared and weakening demand is helping cap price pressures, though inflation is still running above 2% for a fifth straight year.

“With upside risks to inflation and downside risks to employment, monetary policy has to walk a fine line,” she said.