Three top Federal Reserve officials on Tuesday struck a cautious note on the U.S. economy, citing high unemployment, heavy reliance on government support and commercial real estate woes as hurdles to recovery.

Speaking less than a week after the Fed left interest rates unchanged at near zero, a trio of top officials -- San Francisco Federal Reserve Bank President Janet Yellen, Atlanta Fed chief Dennis Lockhart and Boston Fed President Eric Rosengren -- said the economy was still vulnerable.

The strength and durability of the expansion is in question, Yellen said in Phoenix, Arizona. High unemployment, weak job growth and paltry wage increases are a recipe for sluggish consumer spending growth and a tepid recovery.

She said it was not yet clear whether the private sector could carry the load once supportive policies fade.

A fourth official, Richmond Fed President Jeffrey Lacker, was more upbeat, telling CNBC the broad contours of recovery would be the same even without government stimulus.

However, Lacker -- an inflation hawk -- made clear he was not itching to push up borrowing costs yet.

Asked if the Fed would raise rates next year, he responded: It is too soon to say ... it could take longer than that. What I'm going to look for is growth that is strong enough and well-enough established that we need higher real interest rates.

The Fed chopped overnight interest rates to near zero in December and it has pumped more than $1 trillion into the economy to spur a recovery from the deepest downturn since the Great Depression. The White House and Congress also lent support with a $788 stimulus package of tax cuts and spending.

Last week, the Fed reaffirmed its commitment to keep borrowing costs ultra-low for an extended period, and financial markets are listening to Fed officials closely to try to gauge when they may finally move to withdraw their economic support.

The latest remarks eased investor's worries about higher interest rates, helping support prices for U.S. government debt.

Yellen, Lockhart and Lacker are among the voters this year on the Fed's policy panel, while Rosengren will move into a voting slot in 2010. While Yellen and Rosengren are seen as Fed doves, Lockhart is considered more of a hawk.

It's a question of timing, Rosengren told a seminar in London when asked how the Fed planned to exit from its extraordinarily supportive policies. We're not there yet.

A fifth U.S. central bank official who spoke on Tuesday, Fed Governor Daniel Tarullo focused his remarks on regulatory reform.

SELF-SUSTAINING RECOVERY QUESTIONED

Lockhart said U.S. economic growth would be relatively subdued in the medium term.

The situation is much improved, but there are sobering aspects of the economic picture, he told a conference in Atlanta, adding that data on bank failures, foreclosures, unemployment and personal income continue to disappoint.

The U.S. economy grew at a 3.5 percent annual rate in the third quarter, snapping four consecutive down quarters and likely ending the recession that began in December 2007.

But labor market conditions remain dismal. The unemployment rate surged to a 26-1/2-year high of 10.2 percent in October, and a Reuters poll on Tuesday showed economists expect it to hit 10.5 percent in mid-2010 before subsiding.

High unemployment is one factor expected to keep the Fed on the sidelines. The central bank said last week that economic slack, subdued inflation trends and stable inflation expectations argued for a prolonged period of low rates.

At this juncture, it's hard to be encouraged about a fast rebound in job growth, Lockhart added.

In response to a question, he said he could envision scenarios in which the Fed may have to tighten policy even with unemployment frustratingly high.

He said for now, however, the overall objective of policy should be to bring about a durable economic recovery and an environment that reduces unemployment as quickly as possible while containing inflationary pressures.

There will also have to be a judicious removal of government support, he said.

In her speech, Yellen said a problematic drop in consumer prices was a greater risk than inflation, and she noted core inflation, which strips out food and energy costs, had been slowing.

With slack likely to persist for years and wages barely rising, it seems probable that core inflation will move even lower over the next few years, she said.

In contrast, Lacker said he thought the risk of deflation had diminished substantially since the beginning of the year.

As the economy proceeds, maybe not next year, we could see a growing risk of significant increases in inflation, he said.

(Additional reporting by Pedro DaCosta in Phoenix, Lucia Mutikani in Washington, John Parry in New York and Christina Fincher and Nigel Davies in London; Editing by Kenneth Barry)

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