A top Federal Reserve official who dissented from the central bank's move this month to ease monetary policy further signaled he would drop his opposition.

But Minneapolis Fed President Narayana Kocherlakota stopped well short of saying he would support any further easing, and his remarks show he remains firmly on the hawkish wing of the Fed's policy-setting panel.

The Fed, which has already cut short-term interest rates to near zero and bought $2.3 trillion in long-term securities to boost the recovery, said on August 9 it would likely keep benchmark U.S. rates exceptionally low for the next two years. The decision drew three dissents, the most in nearly 20 years.

I see no reason to revisit the decisions of August 2011, Kocherlakota said in remarks prepared for delivery to the National Association of State Treasurers in Bismarck, North Dakota.

I believe that undoing this commitment in the near term would undercut the ability of the Committee to offer similar conditional commitments in the future, and this ability has certainly proved very useful in the past three years, Kocherlakota said. So, I plan to abide by the August 2011 commitment in thinking about my own future decisions.

Kocherlakota, whose turn to vote on the Fed's policy-setting Federal Open Market Committee runs through the end of this year, stopped short of promising not to dissent on future Fed decisions, however, saying that the case for any additional easing would have to be made on its own merits.

Fed Chairman Ben Bernanke plans a two-day policy-setting meeting next month to discuss possible plans for further easing. Originally the talks had been due to last only a day.

Based on Kocherlakota's remarks, such a decision would be a hard sell for him, unless inflation dropped sharply.

Both inflation and inflation expectations are higher, and unemployment is lower and expected to drop further, than last November when the Fed embarked on its most recent round of monetary stimulus, Kocherlakota said.

He expects the Fed's preferred gauge of inflation, core PCE (personal consumption expenditure), to rise to 2.1 percent next year versus an expectation of about 1.3 percent last November.

Meanwhile, the U.S. unemployment rate, which was then at 9.8 percent, has dropped to 9.2 percent, and he expects it to fall to below 8.5 percent by the end of next year.

While it was still disturbingly high, he said, the Fed would have been unable to push it lower without boosting inflation above its 2 percent target, which in turn could unmoor inflation expectations and undercut the Fed's ability to keep inflation in check.

The Fed's policy-setting panel is next scheduled to meet in mid-September to discuss possible easing options.

(Reporting by Ann Saphir; Editing by James Dalgleish)

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