Anna Paulson, president of the Federal Reserve Bank of Philadelphia, has a simple message after last week's rate decision: she thinks the Fed has its interest rates about right.
In her first CNBC interview on Tuesday, Aug 4 2026, Paulson said the current level of interest rates should be enough to get inflation back to the Fed's 2% target. That level sits in a range of 3.5%-3.75%, and she believes it counts as "mildly restrictive" by design.
Last week, the Federal Open Market Committee, the Fed's rate-setting group, voted 9-3 to hold rates where they are. The three dissenters argued the current level may not be tight enough to cool inflation, but Paulson told CNBC's Steve Liesman on "Squawk Box" that the choice was not hard for her. "For me, it was not a close call," she said.
Fed officials have not changed rates at any point this year, and inflation is still running well above target. That is why the biggest argument inside the Fed right now is about how much pressure today's rates are actually putting on the economy.
The 9-3 vote last week highlights the policy disagreement at the heart of the Fed's next few meetings. Paulson is in the group that sees the current range as sufficient, while the three dissenters want more evidence that rates are doing enough to restrain price increases.
Paulson's answer is that policy only needs to be a little bit restrictive, not harshly so. "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," she said.
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Part of Paulson's comfort comes from what she sees under the surface of the inflation numbers. Strip out energy-supply disruptions, tariffs, and similar influences, and she thinks underlying inflation is around 2.4%-2.8%.
The Fed's preferred core inflation gauge, which strips out food and energy, was 3.3% in June. That report came from the Commerce Department on Thursday, and it is still well above the 2% target.
Paulson and her colleagues watch this measure closely because it helps them judge whether their rate settings are working. Paulson said she may have seen "a little bit of mild progress" over the last few months, but she wants more. "I need to see progress from here," she said.
If that progress does not show up, she says the Fed needs to be ready to act. "If we don't see that progress, then we have to be open to recalibrating monetary policy," Paulson said. "You know, we need to get to 2%."
Paulson also made clear she is not rigid about how the Fed operates. She told CNBC she has an "open mind" about a proposal from Chairman Kevin Warsh to cut the Fed's yearly meeting schedule from the current eight sessions per year. "It's healthy to have a discussion about that," she said.
For your portfolio, the practical message is the one about rates.
At the same time, Paulson said the Fed would need to adjust its course if prices do not show further improvement. Interest rates shape borrowing costs, returns on cash, and the prices investors pay for stocks, so the Fed's next move matters.
The number to watch is that same core inflation gauge, because if it moves closer to 2%, the current rate could stay in place for a while.
A Fed leader who says the current level feels right is a sign that quick rate changes are not on the horizon. But Paulson's "open mind" is the part to keep watching, because it is her way of saying nothing is locked in.
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