Speaking at the fifth annual Fisher Real Estate Conference, Parry said consumer spending, housing and financial markets all showed signs of cooling but the Fed could not conclude from one month's or even one quarter's data that the trend would last. "You could make a case that the economy has slowed somewhat," said Parry, who is a voting member of the policy-setting Federal Open Market Committee (FOMC) this year. "It's too early for anybody to declare victory."

The central bank has raised interest rates six times in the past year and accelerated the pace of monetary tightening at its May 16 meeting, raising short-term rates by half a point after five previous quarter-point hikes.After a long lag, economists now see evidence key engines of economic like housing, consumer spending and employment are moderating. Many on Wall Street now expect the Fed to hold rates steady at its June 27-28 policy meeting. Parry told reporters after his speech that he saw a pick-up in inflation based on the core Consumer Price Index (CPI), which excludes volatile food and energy prices.

"The picture with regard to inflation has been very much distorted, confused by what's been happening...particularly to energy prices," he said.

"And now it looks in terms of the total CPI that inflation pressures have perhaps weakened. But I think that's a misreading of the information."The overall CPI was unchanged in April after a big 0.7 percent rise in March. Core CPI rose 0.2 percent, milder than an 0.4 percent rise in March.

Economic data were also giving mixed signals as to whether the tight US labour markets were leading to higher prices, Parry said, adding the Fed was closely monitoring this.