Paulson Keeps Open Mind on Rates, Cites Progress in Inflation Fight

Philadelphia Federal Reserve President Anna Paulson expressed her satisfaction with the current level of interest rates, stating that she believes it is sufficient to keep inflation moving towards the central bank's goal.

In an interview with CNBC, Paulson said that she thinks the current benchmark borrowing rate of 3.5%-3.75% is 'mildly restrictive' and will help bring underlying inflation back down to 2% in an acceptable time period.

Paulson was a voting member of the Federal Open Market Committee (FOMC) last week, which opted by a 9-3 tally to keep interest rates steady. She stated that her vote wasn't a close call and that she thinks underlying inflation is around 2.4%-2.8%, with the core inflation level at 3.3% in June.

However, Paulson emphasized that she will be open to adjusting rates if the current level of inflation doesn't move lower. 'Maybe there was a little bit of mild progress over the last several months, but I want to see more progress on that,' she said. 'If we don't see that progress, then we have to be open to recalibrating monetary policy.'

Paulson also mentioned that she is keeping an open mind about potential changes to the FOMC meeting frequency, including reducing it from eight meetings per year, which has been discussed by Chairman Kevin Warsh.