"While lending conditions imposed by banks have tightened since March, the changes so far are in line with what banks have been doing since the Fed began raising interest rates more than a year ago," Waller said at a financial stability conference in Norway.

"Financial stresses in the banking sector are a factor that my colleagues and I are closely watching as we determine the appropriate stance of monetary policy going forward," Waller said. "The Fed could tighten policy too much if it ignored" the possibility that banks were restricting credit more forcefully than needed to lower inflation for fear they might lose deposits or face other liquidity strains.

But "it is still not clear that recent strains in the

banking sector materially intensified the tightening of lending conditions," beyond what the Fed was trying to do anyway through its interest rate policy, Waller said.

His remarks are the first by a Fed official since policymakers this week held the U.S. interest rate steady. At the same time they also indicated they will likely need to raise rates higher than had been anticipated by the end of the year in order to lower inflation from current levels above 4% back to the central bank's 2% target.

Though Waller in his prepared presentation did not comment on the upcoming July Fed policy decision, his comments mark a step back from concerns that a string of regional bank failures this spring might tighten financial conditions in the same way as Fed rate increases - and raise the risks of the Fed going too far if it added further rate increases on top of that.

That notion was partly behind the Fed's decision this week to delay further rate increases for at least a single meeting, to take stock of how the financial system and the economy overall are faring.

However the Fed is now broadly expected to approve another quarter point rate increase when officials meet on July 25-26.