In speeches and in an interview, three Federal Reserve presidents on Thursday offered three differing views of the risk of inflation. Federal Reserve Bank of Richmond President Alfred Broaddus, speaking to a conference sponsored by the Austrian National Bank in Vienna, said there was still a clear need for US short-term real rates to rise despite tentative signs that the 10-year economic expansion was starting to slow.

"In order to prevent a reemergence of inflationary pressures and, in doing so, to sustain the expansion, US monetary policy must allow short-term real interest rates to rise," Broaddus said, noting that energy price data for the last few months may have given some a false impression of a slowdown in the US economy.

But on the opposite side of the spectrum, Broaddus's counterpart from Kansas City said he expected US economic growth would slow to a sustainable pace in the third-quarter of this year and said the Fed needed to act cautiously since interest rates were already high.

"It's always a tough call," Federal Reserve Bank of Kansas City President Thomas Hoenig told Reuters.

"But when rates are four-and-three-quarters per cent as opposed to (the current Federal Funds rate of) six-and-a-half percent, the risks are different and probably when they are lower, rather (than) higher, moving up has less risk."

Meanwhile, Federal Reserve Bank of Chicago President Michael Moskow said there was still a significant risk of inflation in the US economy but did not go so far as Broaddus to suggest that additional rate hikes were necessary.

-- (Reuters)