Inflation remains well under control, despite the spike in oil prices, but the Federal Reserve stands ready to raise interest rates if price pressures appear to be getting out of hand, top Fed officials said on Wednesday.

John Williams, in his first speech as president of the San Francisco Fed, argued that the recent spike in commodity costs will likely be transitory.

The economy today faces many pitfalls, but I don't believe that runaway inflation is one of them, Williams said, adding that he would not prejudge a possible need for additional bond purchases in the future.

In response to evidence of economic weakness last summer, the U.S. central bank in November announced it would buy some $600 billion in Treasury bonds in an effort to keep long-term borrowing costs low and support the recovery.

In some of the first public speeches by Fed officials since a policy meeting April 26-27 at which the central bank said it would complete those purchases on schedule by the end of June, policy makers who spoke on Wednesday explained why they are in no rush to pull back ultra-loose monetary policy soon.

Eric Rosengren, the dovish president of the Boston Fed, who is a voter this year on the policy-setting Federal Open Market Committee, struck much the same note as Williams, saying a return to 1970s-style inflation was not likely.

He said tame wage growth and high unemployment are helping cushion some of the inflationary impact of higher food and energy costs, by keeping consumer inflation expectations under control.

A rise in inflation expectations can be self-fulfilling if it leads workers to demand higher wages.

But with high unemployment, workers have little power to demand higher wages because they can easily be replaced.

JOB MARKET HEALING SLOWLY

Another U.S. central bank official, Atlanta Fed President Dennis Lockhart, saw steady but modest job growth of about 200,000 jobs per month through the rest of this year after a slow spell.

It may take three years before the size of the nation's work force reaches prerecessionary levels, he said in a speech in Atlanta.

The U.S. Labor Department will report figures for April nonfarm payrolls on Friday. Economists expect that 186,000 jobs were added in April, according to a Reuters poll.

Rosengren said increases in overall U.S. inflation due to supply shocks since the mid-1980s have generally been temporary, a pattern that should play out again.

We should expect the impact on inflation to be transitory -- and that total inflation will converge back to core inflation, which remains well below 2 percent, he said.

The U.S. consumer price index jumped 2.7 percent in the year to March. But so-called core CPI, which excludes more volatile food and energy costs and is a gauge of underlying price trends, climbed just 1.2 percent. The Fed's informal target is 2 percent.

Not all Fed officials are equally sanguine about inflation. Richard Fisher, the Dallas Fed's hawkish president and also an FOMC voter this year, cited worries about rising prices.

The headline (inflation) numbers have gotten a little stout, he told reporters after a speech. We have to carefully monitor how inflation expectations evolve.

Still, he stopped well short of calling for near-term interest rate hikes.

And Lockhart, of the Atlanta Fed, said no tightening of monetary policy is imminent.

It's a bit premature now to anticipate it's going to happen right away, he said.

The sequence and pace of steps that the Fed takes when it is time to reverse its easy money policy will depend on economic conditions at the time, Lockhart added.

READY TO FIGHT INFLATION

If inflation does begin to act up, officials said the Fed has both the tools and the will to attack price threats by bringing up interest rates quickly.

I am committed to responding decisively, and as forcefully as necessary, the Boston Fed's Rosengren said, to ensure that long-term inflation expectations remain stable and that food and energy prices are not passing through to other prices.

In response to the worst recession in generations, the Fed slashed official borrowing costs to effectively zero and implemented an array of unorthodox lending facilities to heal frozen credit markets. Many of those measures have been shuttered as market conditions improved, but the controversial buying of assets to keep down long-term rates has continued.

Should it prove necessary to counter inflationary pressures, I will be among the first to advocate the unwinding of some of the stimulus we have provided, Fisher said.

Fisher cited a rebound in manufacturing and capital goods orders as not only a positive short-term indicator of economic momentum but also potentially a sign that the U.S. economy was finally moving away from an overreliance on consumer spending.

They are harbingers of needed rebalancing, he said.

(Additional reporting by Ros Krasny in Boston, Ann Saphir in Los Angeles, and Joe Rauch in Atlanta; additional writing by Mark Felsenthal; Editing by Leslie Adler)

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