(Reuters) -Philadelphia Federal Reserve President Anna Paulson said on Thursday she is approaching the U.S. central bank's next meeting "cautiously," despite supporting its last two interest rate cuts, as the threat of prolonged high inflation needs to be balanced with the risk of rising unemployment.

"On the margin, I'm still a little more worried about the labor market than I am about inflation, but I expect to learn a lot between now and the next meeting," Paulson said in remarks prepared for delivery at a Philadelphia Fed bank conference in Conshohocken, Pennsylvania.

Each rate cut, she said, "raises the bar for the next cut ... because each rate cut brings us closer to the level where policy flips from restraining activity a bit to the place where it is providing a boost," Paulson said, as she explained her thinking ahead of the next rate-setting Federal Open Market Committee meeting on December 9-10. "So, I am approaching the December FOMC cautiously."

Paulson will not vote at the meeting, which is expected to be hotly contested as several voters have already signaled they could dissent if the Fed cuts rates and several others have signaled possible dissent if the Fed does not. Paulson will rotate into one of the Fed's 12 rate-setting voting spots next year.

The U.S. economy, she said, is doing "OK," but lower- and moderate-income households are struggling, while higher-paid Americans continue to spend. That leaves the economy unusually dependent on the continued demand from the highest earners, a somewhat narrow base that "may make the growth outlook particularly sensitive to equity valuations."

The U.S. September jobs report, released earlier on Thursday after a lengthy delay, was "encouraging" she said, because while the unemployment rate ticked up to 4.4%, it showed the slowdown in job gains has mostly matched up with a slowdown in labor supply, leaving the job market roughly in balance.

Still, she said, most of the job growth through September has been concentrated in healthcare and social assistance - often a precursor to a slowdown.

On inflation, she said her base case remains that tariffs will not lead to ongoing inflation. Slowing demand is keeping a lid on price pressures. Even so, she said, inflation is on track for five years of above 2%.

"With upside risks to inflation and downside risks to employment, monetary policy has to walk a fine line," Paulson said. "As I think about monetary policy over the longer arc, I'll be focused on how to appropriately balance the risks to both inflation and the labor market, guided by my commitment to deliver on the FOMC's price stability mandate and get inflation all the way back to 2%."