Cleveland Fed's Hammack supports keeping rates around current 'barely restrictive' level

Cleveland Federal Reserve President Beth Hammack on Thursday gave indications that she thinks the central bank could be nearing the end of what could be a brief rate-cutting cycle.

The policymaker told CNBC that she thinks the current level of interest rates is “barely restrictive, if at all” when it comes to the economic impact.

Restrictiveness is a key metric for Fed officials, who are divided ideologically over whether labor market weakness or inflation is a bigger threat. Hammack has been more in the hawkish camp when it comes to inflation, preferring higher rates and more restrictive policy as a bulwark against another surge in prices.

“I think that we need to maintain a modestly, somewhat restrictive stance of policy to make sure that we are continuing to bring inflation back down to our 2% objective,” she told CNBC's Steve Liesman on “Squawk on the Street.” “Right now, to me, monetary policy is barely restrictive, if at all, and I think we need to make sure that we're maintaining that somewhat restrictive stance to bring monetary to bring in place.”

Hammack added that she thinks the current federal funds rate, targeted in a range between 3.75%-4%, is “right around a neutral rate,” indicating it does not need to come down much further.

As a voting member of the Federal Open Market Committee this year, Hammack serves as a key policy voice.

The Fed next meets Dec. 9-10, and market expectations have swung from a near-certainty that the committee would approve a third consecutive quarter percentage point reduction to now pricing in about a 60% probability that the committee will stand pat, per the CME Group's FedWatch tracker of futures prices. Minutes from the October meeting, released Wednesday, detailed the sharp divide among committee members.

While focused on inflation, Hammack expressed concern over current price levels, noting that interviews she and her staff have conducted around the Cleveland area indicate labor market pressures as well as inflation concerns that are causing difficulty for households to make ends meet.

“What we hear from the workers is that they're holding on to their jobs for dear life, if they have them,” she said. “We are in this slow, this low-hiring, low-firing environment. But what I also heard ... was that the money that they have coming in is just not stretching as far as it used to. What used to cost $30 now costs $5, and so ... that inflationary pressure is still very salient for them.”

Addressing the September nonfarm payrolls report released Thursday, Hammack called the picture “mixed” as it showed both higher-than-expected payrolls growth and a tick up in the unemployment rate.