![Philly Fed president talks political pressure, interest rate, what it means for Lancaster [Q&A] | Local Business](https://www.europesays.com/wp-content/uploads/2026/02/699f800b0e41a.image_.jpg)
The leader of the region’s Federal Reserve Bank made a stop in Lancaster on Wednesday to meet with local business leaders ahead of a meeting where she gets a vote on an interest rate that affects mortgages, savings accounts and more.
In July, Anna Paulson became the president of the Federal Reserve Bank of Philadelphia, which serves the Third District — eastern and central Pennsylvania, southern New Jersey and Delaware. With a doctorate in economics from the University of Chicago and experience as a finance professor at Northwestern University, Paulson served as senior advisor to the president of the Federal Reserve Bank of Chicago until her move to the Philadelphia bank.
The Philadelphia Fed oversees the region’s financial institutions, provides cash to banks, offers community outreach to economic development organizations and produces research to identify current economic opportunities and challenges.
Paulson is working to visit places across her district, including Lancaster County, to learn how economic changes are affecting people. On Wednesday, Paulson visited one of Bank of Bird-in-Hand’s “Gelt Buses,” a mobile banking service catering to Plain Sect customers. At the Cork Factory Hotel in Lancaster city, she spoke to members of the Lancaster Chamber of Commerce, Astro Machine Works, Cargas, DenTech Industrial and more.
Anna Paulson, center, president and chief executive officer of the Federal Reserve Bank of Philadelphia, speaks with Liz Ackerman, left, executive director of the Northern Lancaster County Chamber of Commerce, and Heather Valudes, president and CEO of the Lancaster Chamber, in Lancaster on Wednesday, Feb. 26, 2026, after participating in a roundtable discussion with local business leaders.
SUZETTE WENGER | Staff Photographer
Input collected during these visits make their way into meetings at the Federal Open Market Committee, where Paulson is currently serving a rotating term as a voting member. The committee, which has 12 voting members, holds eight meetings a year to review economic decisions and assess the risks to price stability.
Members also vote on the federal funds rate, which influences how much interest homeowners pay on their mortgages, how much interest credit cards charge and how much savings accounts make.
ABOUT THE FEDERAL FUNDS RATE
The federal funds rate is the interest rate charged by banks to borrow from each other overnight, according to the Federal Reserve Bank. Changes to the rate, including hikes and cuts, can create a ripple effect on interest rates and borrowing power throughout the economy.
Federal officials tend to cut the federal funds rate to grow the economy and raise it to combat inflation. Those changes can have large impacts on local housing, automotive and banking industries.
The Federal Open Market Committee last voted on the federal funds rate at the end of January. The committee voted to maintain the rate at a target range of 3.5 to 3.75%. Anna Paulson of the Federal Reserve Bank of Philadelphia, which includes Lancaster County in its coverage area, joined the majority of her peers to vote in favor. Only two voting members voted against the measure, opting to favor a small rate cut.
The committee will meet next on March 17 and 18.
Paulson sat down with LNP | LancasterOnline Wednesday to talk about her job, Lancaster County’s economy and her decision-making.
This interview has been edited for length and clarity.
President Trump, for one, has been vocal about his support for rate cuts this year. What, if any, influence should pressure from elected politicians have on federal reserve interest rate decisions?
There’s a lot of research that shows that countries that have independent central banks generate better outcomes for their citizens. Stronger growth, more stable prices, lower inflation. So I think it’s really important for monetary policy to be made focused on the data, focused on the goals.
So focusing on data as opposed to political pressures, is that what you’re saying?
Focusing on the things that influence inflation, focusing on the things that influence labor market outcomes, the risks to those things, all of those things. It’s the whole economic package, but it’s the inputs into the goal variables.
Lancaster’s unemployment rate is nearly two points lower than the national average, and our housing market remains much tighter. How do you balance a national, “one-size-fits-all” interest rate set by the FOMC with the reality that it could have different impacts on Lancaster County than other communities in the Third District and the rest of the country?
Yeah, so that’s kind of how it’s supposed to work, right? You’re setting conditions for the aggregate economy. Then it’s all the decisions of individual consumers, businesses, financial institutions that have that effect as it plays out. We control one interest rate, right? It’s this overnight interest rate, but then it propagates out to longer-term interest rates that actually affect people’s decisions. So if we raise rates, then it tends to be the case that over time, interest rates on auto loans, on home loans, on credit card loans, would go up.
That’s gonna mean different things to different people. For some people, it’s not gonna matter at all, because they don’t borrow on credit. It could be because they have lots of wealth, or it could be because they’re shut out of the credit market altogether. It’s meant to vary, and so that’s this dance between the aggregate and then the individual experiences that make up that aggregate.
How do you think about Lancaster amidst all of that?
So there’s 19 people around that FOMC table, and we’re all trying to paint a picture. Some of those pictures are coming from different places. I’m gonna weigh Lancaster higher because it’s here in the Third District, and because I’ve had these individual conversations. Then I’m listening to what everybody else is saying, too.
So, if what somebody else says is, “Oh, wait, the same thing is going on in Atlanta and Dallas as in Lancaster.” — Oh, now I’m going to say, “Wow, that’s super important. That’s closer to a national trend.” But if what I’m seeing here in the Third District, if our manufacturing firms are doing great, and everywhere else, they’re struggling… we gotta put those things in balance. But we also have to ask why.
Lancaster County’s real estate market has struggled through rising prices and sluggish movement, due in no small part to high interest rates. Obviously, there’s different factors at play there. Where do you see interest rates going as we move slowly toward the prime summer sales period, when more people will be buying homes and moving?
In terms of the part that’s my job, we’re gonna be focused on our goals, which are getting inflation to 2%, maximum sustainable employment. So it’s really gonna be a function of, well, what do we see in the data? Are we getting there? Are we not getting there? Those are gonna be the key things that are gonna be driving our decisions.
Do you have any insights into where it could be headed? Or that’s to be seen?
I think that’s really to be seen, right? We’ll be balancing those two goal variables and the risk to those goal variables as we go through the year.
I’m sure there are several factors you consider for your stance on interest rates as a member of the FOMC. What would you have to see to support […] rate hikes, and what would make you feel satisfied where they’re at?
I think what I’m focused on right now really are the things that are gonna be influencing the trajectory for employment. So is the labor market stable? Is it growing? Is it shrinking? That’s really important. What’s happening to inflation? What are we seeing? Underlying trends look good, but we haven’t seen enough evidence yet.
Are there any other factors that people should be keeping an eye out for?
A big part of the conversation today was about technological changes, about AI, about productivity growth. As we’re incorporating new technologies, if that allows us to grow faster without generating pressures on capacity, that means we can experience growth without inflation pressures. Really needing to understand that is super important, not necessarily over the next six weeks, but certainly as we look out over the next year, the next few years.
Higher interest rates are meant to combat inflation. I also know that inflation is a word some folks throw around without completely understanding it. What are some things people may not understand, but should, about how inflation can be insidious, especially when fighting inflation can lead to job losses and higher unemployment?
Inflation is the general increase in prices, the growth in prices. There’s a healthy level of inflation for an economy, and we’ve defined that to be 2%.
If we were trying to target zero, we’d be too worried about strong growth, we might leave people on the sidelines. So 2% is this healthy level. The other thing that’s great about 2% is that there are inevitable upturns and downturns. And when there’s a downturn, you want to be able to cushion the economy by lowering interest rates, and 2% gives you some room to move interest rates around.
The big challenge with inflation is lots of people are on a fixed paycheck, and if stuff costs more, then you can’t buy as much, right? It’s harder to feed your family, harder to put gas in the car, harder to afford a home, a whole host of things that are associated with that general increase in prices.
I think people sometimes confuse high prices with high inflation. And inflation is really about the growth rate of prices, of the general level of prices. It’s more about how are all those prices growing, rather than what’s the level.
Are there any core challenges that stood out to you for Lancaster in particular?
This is something that I’ve heard almost everywhere I’ve gone. We’ve got demographic challenges, right? Lancaster’s actually got a higher population growth rate than many areas in many other counties.
But people are worried about the folks who are the machinists, the electricians, the HVAC specialists, the skilled trades. That’s a group of people who tend to be older and not necessarily replacing those folks at the same pace. I think people are really interested in how we bring younger people here, create opportunities for them, and make it an attractive place for people to grow their families and have good opportunities. But that’s really a universal challenge.