"I believe current data are consistent with achieving a 'soft landing,' and I will be looking for data over the next couple months to buttress this view," Waller said at an event at the Kansas City Fed. "While I don't believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted," he said.

Waller noted that economic growth was now moving forward at a "more moderate pace" with the job market in much better balance, amid a moderation in inflation. But he said uncertainty about how the economy will perform in the months ahead makes it tricky to know when the Fed can lower its benchmark overnight interest rate from the current 5.25%-5.50% range.

Waller said there are three scenarios of varying probability that face the central bank in the months ahead.

The most "optimistic" scenario with a "significant but not high probability" sees continued steady declines in inflation pressures, and under that path, "I could envision a rate cut in the not-too-distant future," he said.

But under a more likely scenario, Waller said declines in inflation would be more uneven, which would call into question whether the Fed was moving sustainably back to its 2% target. "In this case, a rate cut in the near future is more uncertain," he said. The least likely but possible outlook would be a resurgence in inflation, which he did not link to a monetary policy path.

The Fed will hold its next policy meeting on July 30-31 against the backdrop of ebbing price pressures in recent months that have fueled market expectations the central bank can soon cut rates. While some high-profile economists have said the upcoming meeting is a valid time to cut rates, markets overwhelmingly expect the easing to happen at the Sept. 17-18 meeting.

Fed Chair Jerome Powell has spoken a number of times this month but declined to give firm guidance on the expected timing of rate cuts. He said the U.S. central bank is seeking confidence inflation is moving back to 2% before acting.

'SWEET SPOT'

Waller cautioned in his remarks that while markets are focused on the timing of when the Fed will cut rates, central bankers have a different framework.

"I think clearly that the next direction for the policy rate is most likely - you never say never in central banking - but most likely is rate cuts at some point in the future," he said.

But, "from a macro perspective, whether you go in September or November or December with a rate cut really doesn't matter, unless there's some big shock that hits the economy in that time span," Waller said. For Fed officials, when it comes to deciding when to cut rates, "it's not a particular meeting, it's when we think that conditions are right to go and that's it."

Waller was particularly upbeat about the state of the jobs market. "Right now, the labor market is in a sweet spot" of moderate job gains, with the unemployment rate "close to what is thought of as its long-run value."

He added that "in terms of the employment leg of the dual mandate, we may well be able to achieve the soft landing," referring to a scenario in which inflation declines without triggering a painful recession and sharp rise in unemployment.

But he added that "there is more upside risk to unemployment than we have seen for a long time."