U.S. inflation does not look like it is cooling fast enough to allow the Federal Reserve to hit pause on the interest-rate hike campaign it began more than a year ago, two Fed policymakers said on Thursday.

The remarks, from Dallas Federal Reserve Bank President Lorie Logan and St. Louis Fed President James Bullard, appear to represent a minority hawkish view at the Fed, but one that has gained ground in the runup to the Fed's next meeting, on June 13-14.

On Thursday, rate-futures markets reflected a one-in-three chance of a June rate hike, compared with a one-in-10-chance seen a week ago. The Fed has lifted borrowing costs at each meeting since March 2022, bringing them from near zero to a 5.00-5.25% range as of early this month.

Fed Governor and vice chair nominee Philip Jefferson, also speaking on Thursday, said that while progress on inflation is slowing, it is still too early for the full impact of those rapid rate increases to be fully felt.

It's a view that Fed Chair Jerome Powell has also sketched out as a reason to potentially take a break from rate hikes next month while policymakers assess those lagged effects. He and others have also noted the potential for recent bank stress to further slow the economy by tightening credit conditions and squeezing lending.

Powell is scheduled to speak on Friday and investors anticipate he will update those views in light of what has arguably been mixed economic data since the Fed last met in early May.

Consumer price inflation, for instance, edged down to a 4.9% annual pace in April but is still far above the Fed's 2% goal. Hiring has slowed, but unemployment at 3.4% is at its lowest since 1969.

Bank stress meanwhile appears to have been concentrated in a few regional banks and is not broadly impacting financial institutions with anything like the intensity in the immediate aftermath of the runs on Silicon Valley Bank and Signature Bank that led to their collapse in March.

SKIPPING?

Jefferson did not lay out an explicit case for what the Fed should do in June. However, his embrace of the idea that there is still a lot of policy tightening in the pipeline suggests he could be comfortable with a pause.

Dallas Fed's Logan had the opposite presumption.

"The data in coming weeks could yet show that it is appropriate to skip a meeting," she told the Texas Bankers Association in San Antonio. "As of today, though, we aren’t there yet."

And though inflation is down from last year's peaks and the economy overall is less out of balance than it had been, she said, "we haven’t yet made the progress we need to make" on inflation.

Speaking to the Financial Times, St. Louis Fed President James Bullard said the slow pace of progress on inflation "may warrant taking out some insurance by raising rates somewhat more to make sure that we really do get inflation under control."

Both Bullard and Logan said they remain open-minded about what to do in June.

(Reporting by Ann Saphir and Howard Schneider; Editing by Chizu Nomiyama)