A top Federal Reserve official said late Wednesday the central bank should start raising short-term interest rates "sooner rather than later" because of a "broad-based" improvement in the economy and job markets.

"We have seen data come in stronger than we expected," said Esther George, president of the Federal Reserve Bank of Kansas City.  "The labor markets have progressed faster than some of the forecasts have suggested they would."

George spoke to FOX Business on eve of the opening of her bank's annual economic conference in Jackson Hole, Wy. She will welcome Fed chair Janet Yellen, other Fed officials and economists at the event, which will focus on the labor market. 

Yellen will give a major speech on Friday morning. Her remarks will be closely watched for clues about the Fed's plans for unwinding years of heavy stimulus for the economy stemming from the 2008 financial crisis, including holding short-term interest rates at near zero.

Yellen has expressed caution about raising rates too fast out of fear of short-circuiting the recovery, especially in job creation. But George is considered one of the Fed's inflation "hawks" -- members who worry more about possible resurging inflation because of Fed stimulus. 

George said the economy is growing healthy enough to handle higher rates under a "systemic" Fed plan that would provide policy clarity to consumers and investors--and that would not put the Fed "behind the curve...because we know over history that brings its own set of consequences, too."

"My objective is not to see rates rise sharply," she said in an interview with FOX Business. "But I do think many of the policy benchmarks we look at are already signaling that we should be off of zero (short-term rates).  And as we see the economy improve, we should begin sooner rather than later, in my view, so that the economy has time to adjust."

"We don't want to wait until inflation looks like a problem," George added. "We don't want to wait until risk(s) in the economy around financial stability raise concerns." 

The Fed's most recent survey of its officials shows most of them expect to start raising short-term rates sometime next year. 

 

Peter Barnes joined FOX Business Network (FBN) in September 2007. He serves as FBN's senior Washington correspondent.