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WASHINGTON, Nov 16 (Reuters) - U.S. Federal Reserve Governor Christopher Waller, an early and outspoken "hawk" in the central bank's efforts to confront inflation, said Wednesday he is now "more comfortable" with smaller rate increases going forward after recent data showed the pace of price increases slowing. Recent positive news on inflation has led investors to bet the Fed may not have to do as much as expected, and may only need to raise the target policy rate to around 5%. Waller said signs the economy and wage growth are slowing have added to his sense that Fed policy is beginning to do its job. But he cautioned it was too early to pin down just how high rates may need to go. "Getting inflation to fall meaningfully and persistently toward our 2% target will require increases in the federal funds rate into next year.

Recent positive news on inflation has led investors to bet the Fed may not have to do as much as expected, and may only need to raise the target policy rate to around 5%. Waller said signs the economy and wage growth are slowing have added to his sense that Fed policy is beginning to do its job. But he cautioned it was too early to pin down just how high rates may need to go. "Getting inflation to fall meaningfully and persistently toward our 2% target will require increases in the federal funds rate into next year. Reporting by Howard Schneider and Ann Saphir; Editing by Andrea Ricci and Deepa BabingtonOur Standards: The Thomson Reuters Trust Principles.

Yields on U.S. Treasury securities, which had dropped sharply after the Fed statement was released, turned higher. The 2-year note - the bond maturity most sensitive to Fed policy expectations - was up 6 basis points to about 4.61%. The document "implied that (the Fed) may be aiming for a higher medium-term level for the fed funds rate than currently expected," Nelson said. The language in the policy statement acknowledged the broad debate that has emerged around the Fed's policy tightening, and opened a new stage in that discussion. The Fed's statement "was a lot more definite about a possible downshift than I thought it would be.

"Ongoing increases in the target range will be appropriate," the U.S. central bank said at the end of its latest two-day policy meeting. The language acknowledges the broad debate that has emerged around the Fed's policy tightening, its impact on the U.S. and world economies, and the danger that continued large rate hikes could stress the financial system or trigger a recession. The policy decision set the target federal funds rate in a range between 3.75% and 4.00%, the highest since early 2008. The U.S. central bank has raised rates at its last six meetings beginning in March, marking the fastest round of rate increases since former Fed Chair Paul Volcker's fight to control inflation in the 1970s and 1980s. The economy, the Fed noted, appeared to be growing modestly, with still "robust" job gains and low unemployment.

Register now for FREE unlimited access to Reuters.com Register"There is clarity that monetary policy will be restrictive for some time, until there is confidence inflation comes down. The (Federal Open Market) Committee has said policy rates will increase further," Brainard said. But "we also will be learning as we go and that assessment will reflect incoming data and also risks domestically and globally ... The Fed has raised rates rapidly this year, using three-quarter point increments of late to bring the target federal funds rate to a range between 3% and 3.25%. "We're headed for this four and a half percent-ish federal funds rate by March," Evans said, with little time left for data to shift officials' views.

CHICAGO, Oct 10 (Reuters) - Tighter U.S. monetary policy has begun to be felt in an economy that may be slowing faster than expected, but the full brunt of Federal Reserve interest rate increases still won't be apparent for months, Fed Vice Chair Lael Brainard said Monday. Still, the Fed vice chair gave no indication that economic weakness was at a point where it would change Fed plans to continue raising interest rates. "Uncertainty remains high, and I am paying close attention to the evolution of the outlook as well as global risks," that could stress financial markets Brainard said. Still "monetary policy will be restrictive for some time to ensure that inflation moves back to target over time," Brainard said. Register now for FREE unlimited access to Reuters.com RegisterReporting by Howard Schneider; Editing by Andrea RicciOur Standards: The Thomson Reuters Trust Principles.

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