Dueling views on the outlook for inflation and U.S. monetary policy by two top Federal Reserve officials on Friday underscored divisions at the central bank as it nears the end of a controversial stimulus program.

In comments that reflect the majority view at the Fed -- including Chairman Ben Bernanke -- Atlanta Fed President Dennis Lockhart said it was unlikely that recent spikes in commodity costs will lead to runaway increases in prices.

With longer-term inflation expectations remaining stable -- and predicting that commodity price growth will stabilize -- my view is that current monetary policy is appropriate, Lockhart told the Knoxville Economics Club in Tennessee.

Richard Fisher, president of the Dallas Fed and a self-proclaimed inflation hawk, took a divergent view, saying that prolonged easy monetary policy could compound what might otherwise be transitory inflationary pressures.

Warning of unpleasant U.S. inflation data ahead, Fisher called on the U.S. central bank to stop spiking the punch bowl with more accommodative policy and said the Fed may even need to end its $600 billion bond-buying program early.

No amount of further accommodation by the Fed would be wise, he told the Society of American Business Editors and Writers in Dallas. Indeed, it may well be that we should consider curtailing what remains of QE2, he said, referring to the Fed's second round of quantitative easing, which is slated to end in June.

The prices of oil and other commodities have spiked, sparking inflation fears, hit by both strong demand from rapidly growing emerging economies and fears of supply disruptions amid a wave of pro-democracy protests in the Middle East and North Africa.

U.S. crude has been trading at the highest prices since September 2008, rising above $110 a barrel, and the average price of gasoline stands around $3.70 a gallon.

But Lockhart said that while costly fuel is putting a dent in household budgets, the overall effect on inflation is likely to be muted.

In part that's because high unemployment -- at 8.8 percent in March -- is keeping wage-driven inflation under wraps, he said.

Conceding that point as reasonable, Fisher -- who holds a voting seat this year on the Fed's policy-setting panel -- nevertheless said the Fed should not compound the risk of fueling inflation by adding more liquidity.

Several other hawkish Fed policy makers have pushed noisily in recent weeks for the central bank to heed signs of incipient inflation and to begin to think about raising rates, as the European Central Bank did on Thursday for the first time since 2008.

But Bernanke and other core members of the Fed's policy-setting Federal Open Market Committee have said the recovery is too fragile to withdraw support yet.

Given the still-fragile nature of the recovery, Lockhart said Fed officials should avoid discussing their exit strategy in too great detail, lest they send the wrong signal to the public and financial markets about the direction of interest rates.

In response to the deepest recession in generations, the Fed slashed interest rates to near zero and also committed to buy more than $2 trillion in government bonds and mortgage debt.

U.S. gross domestic product expanded at an annualized rate of 3.1 percent the fourth quarter, a rebound which is less robust than normally seen after a steep downturn.

(Reporting by Pedro Nicolaci da Costa in Knoxville Tenn., Chris Baltimore in Dallas, Ann Saphir in Chicago; Editing by Leslie Adler)

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