The president of the Federal Reserve Bank of Philadelphia said additional interest-rate increases are needed to contain inflation, while signaling a preference for gradual tightening.

Bloomberg reported on November 10 that Philadelphia Fed President Anna Paulson said at a bank-hosted event that "for now, further gradual tightening appears appropriate." She said wage pressures remain limited and inflation expectations are still in line with the Federal Reserve’s 2% target.

Paulson said the Fed would respond more quickly if inflation expectations rise, wage pressures intensify and underlying inflation moves higher. For now, there are no signs of that, she said. She also stressed that skipping one rate increase would reflect a change in pace, not a shift in the direction of tightening.

The Fed raised its benchmark rate by 0.25 percentage point in September and then left it unchanged at 3.75% to 4.00% at its October meeting. Still, persistent price pressures have strengthened the case for another increase. Fed Governor Christopher Waller said on November 10 that a 0.50 percentage-point increase could be needed at the December meeting.

U.S. consumer price data released that day also shaped the outlook for further tightening. Core CPI, which excludes food and energy, rose 0.3% from a month earlier, topping market expectations. Paulson said underlying inflation has stalled in a 2.5% to 3% range, indicating that price pressures have yet to ease.

She said tariffs, higher energy prices linked to the Iran war and expanded construction of artificial intelligence data centers are contributing to inflation. While the effect of tariffs is gradually fading, the impact of energy supply and AI-related demand on prices remains difficult to predict.

On the labor market, Paulson said conditions continue to improve, supported by stronger consumer spending and the economy’s resilience. Some companies are moving to raise wages more aggressively in response to higher living costs, but there is still little evidence that trend has spread across the broader economy.

Paulson, who votes on this year’s Federal Open Market Committee, said gradual rate increases give households, businesses and financial markets time to adjust. Still, she maintained that additional tightening remains necessary because underlying inflation continues to run above target.