Philadelphia Fed President Paulson content with rates at current level, but keeping an open mind

Philadelphia Federal Reserve President Anna Paulson said Tuesday that she thinks the current level of interest rates is sufficient to keep inflation moving toward the central bank's goal.

In her first CNBC interview, the policymaker insisted she has an open mind about where monetary policy should go, but was confident in her vote last week to keep the Fed's benchmark borrowing rate anchored at its current target level of 3.5%-3.75%.

"I think we need ... policy that's mildly restrictive, and I think policy has been mildly restrictive to get underlying inflation back down to 2% in an acceptable time period," Paulson told CNBC's Steve Liesman during a " Squawk Box " interview. "I need to see progress from here."

The level of restriction that the current policy level is having on the economy is a key debate point for Fed officials, who have held rates steady all year as inflation has stayed well above the 2% target.

At last week's meeting, the Federal Open Market Committee, of which Paulson is a voting member, opted by a 9-3 tally to keep the hold on rates. Dissenting voters questioned whether the current rate level is sufficiently restrictive to bring inflation lower.

However, Paulson said voting with the majority wasn't a tough decision.

"For me, it was not a close call," she said, adding that she thinks underlying inflation outside of energy supply shocks, tariffs and other factors is around 2.4%-2.8%. The core inflation level that the Fed uses as its primary forecasting tool was 3.3% in June, the Commerce Department reported Thursday.

If that level doesn't move lower, then Paulson said she'll be open to adjusting rates.

"Maybe there was a little bit of mild progress over the last several months, but I want to see more progress on that, and that's what I'm really focused on," she said. "If we don't see that progress, then we have to be open to recalibrating monetary policy. You know, we need to get to 2%."

Paulson added she is keeping an "open mind" about some of the changes Chairman Kevin Warsh has discussed, including the potential to reduce the frequency of FOMC meetings from the current level of eight per year.

"It's healthy to have a discussion about that," she said.

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