St. Louis Federal Reserve Bank President William Poole said on Friday that inflation must be kept under wraps, but if both growth and price pressures were sufficiently weak, he would back a reduction in U.S. interest rates.

If inflation pressures are easing, even if only gradually, and there is a genuine prospect that inflation will return to the comfort zone, then I see no reason to accelerate the decline in inflation by maintaining a restrictive policy in the face of declining employment, Poole told an audience at Middle Tennessee State University.

Policy needs to be as disciplined as necessary to get the job done, but not more so, he said.

If it appears that the economy is falling below the baseline forecast path, then my bias will be in the direction of wanting to be sure that the data paint a consistent picture before I advocate a policy easing, the St. Louis Fed chief said. But if the picture is consistent, and inflation risk is receding, then I will not hesitate to advocate policy easing.

Poole is slated to take a voting slot on the Fed's policy-setting Federal Open Market Committee next month if the Atlanta Fed does not have new president in place, and will be among the voting members of the panel next year as well.

After a series of 17 rate hikes stretching over a two-year period, the FOMC moved to the sidelines at its meeting on August 8 and again held rates steady at its last meeting on September 20.

Poole said he felt that the current setting of monetary policy was mildly restrictive. He also spelled out that he felt the likelihood of a future cut in official interest rates was roughly equal to that of an increase.

My own sense is that the outlook for the fed funds rate is roughly symmetrical, he said.

Poole acknowledged that interest rate futures signal some expectation the Fed will trim rates early next year, while 10-year U.S. Treasury note yields were lower than current Fed rates of 5.25 percent. He said that either bond yields would rise, or the Fed would ease.

The spread between the fed funds rate and 10-year yields is negative and that is very unusual ... (it is) extremely unlikely to be the long-run equilibrium situation, he said.

Poole is generally considered an inflation hawk, but he made clear on Friday he was willing to act aggressively to buffer the economy if inflation were no longer a concern and growth was faltering.

With long-run inflation contained, the FOMC has flexibility to respond, vigorously if necessary, to economic weakness should it arise, he said.

He also said that the latest numbers signaled that the United States may be over the peak of inflation.

It looks like the worst of the inflation news may be behind us, but there is always the prospect of surprises, Poole told reporters after delivering the speech in this town, 35 miles

south of Nashville.

The U.S. Commerce Department said earlier on Friday that the core PCE price index, the Fed's favored measure of price pressures facing consumers, rose 0.2 percent in August after gaining 0.1 percent in July.

The year-on-year pace of the core PCE rose by a faster clip of 2.5 percent, after 2.3 percent the previous month. But Poole said this reflected comparison effects with inflation last year and said he paid more attention to the monthly change.

The most recent numbers are in line with expectations and suggest to me we are either on hold, or it looks like ... the tendency for the inflation rate to be rising has stopped and maybe we are getting ... a little better news, he said.

But Poole emphasized that his first concern was keeping inflation at bay.

Inflation control is our ... most important responsibility and we should not allow wishful thinking to delay tough action, he said.

Inflation