Investing.com -- Federal Reserve Bank of Cleveland President Beth Hammack said Tuesday that the central bank may need to raise interest rates if inflation does not moderate.

Hammack told CNBC that she will keep an open mind about the Fed's interest rate policy decisions. She added that if inflation continues at elevated levels without any restraint from current policy, the Fed may need to raise rates to bring inflation down.

The Cleveland Fed president noted that inflation remains too high and that core inflation has been elevated. She said the inflation problem is not limited to energy prices alone.

The U.S. Federal Reserve held interest rates steady this month, but policymakers expect a hike later this year amid growing concerns about inflation lodged above the U.S. central bank's 2% target.

Meanwhile, the U.S dollar was headed for its biggest monthly gain in nearly a year. A stronger dollar makes gold more expensive for overseas buyers.

Hammack pointed to high core services inflation as an area of concern. She also said that investment in artificial intelligence has created upward pressure on inflation.

The Fed official said the job market is around full employment and growth appears strong. She added that if consumer data remains solid, current Fed policy may not be restrictive enough. Hammack said she will enter Fed meetings with an open mind and will not prejudge outcomes. She emphasized the importance of central bankers being transparent about their reaction function.