It would be harder for the Federal Reserve to deal with a spike in inflation than a softening of growth, a key Fed policy-maker said on Friday, suggesting the central bank may want to err on the side of higher interest rates.

There are always risks on both sides. There are risks that we would stop too soon and risks we would stop too late, and what we have to do is find the best balance we can between those two risks, St. Louis Fed President William Poole said in an interview with Bloomberg Television.

My own view is that inflation is the key here because I think we have a lot of evidence that if the inflation rate starts to get away from us, that is a much harder process to reverse than if we see the economy softening, because I believe the economy would react pretty quickly and constructively to the end of the tightening ... whereas inflation is a much harder thing to stop once it gets going, Poole said.

Poole, who is not a voting member of the policy-setting Federal Open Market Committee under this year's rotation, said he believes the economy is on a very solid track -- with signs of both tightness and slack in capacity.

As long as the inflation rate stays where it is, there is no reason not to have the economy continue to grow, he said.

I think there are pockets of tightness in both the physical capacity and the labor market, but there are a lot of other places where there's a lot of excess capacity, so I think the economy is on a good solid course and I don't see any reason in my own view to say we're in any sort of difficult situation, Poole said.

I think that the market is reading the current numbers in a very sensible way and what I think we need to pay attention to are not little nuances around the current numbers but rather the bigger things that may come along and surprise us, he added.

Inflation