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Kansas City Federal Reserve President Esther George, and a voting member on the Federal Reserve Open Market Committee (FOMC) this year, said the monetary-policy setting committee "should proceed with caution" as it considers future rate hikes.

Following its December meeting, the committee moved forward with its fourth rate hike of 2018, raising the federal funds target rate by a quarter-point to a range of 2.25 to 2.5 percent. The committee also pared its projection for 2019 rate hikes from three to two. It is set to meet next Jan. 29-30.

"A pause in the normalization process would give us time to assess if the economy is responding as expected with a slowing of growth to a pace that is sustainable over the longer run," George said while speaking at the Central Exchange Tuesday. "Failure to recognize these lags [in monetary policy] could lead to an overtightening of policy, a downturn in economic growth and an undershooting of our inflation objective."

George noted that the U.S. is enjoying a long period of growth and has a low unemployment rate, stable inflation near the Fed's target and the GDP is increasing at a moderate pace.

"Looking ahead, I would expect to see a somewhat slower rate of growth, closer to but perhaps still a bit above, the economy's longer-run growth potential," George said. "While we have begun to see some slowing in interest-sensitive sectors such as housing and motor vehicles, considerable underlying momentum remains and should serve to sustain the expansion."

George also highlighted potential economic headwinds, such as trade policy and financial market volatility.