DALLAS, Texas (Reuters):

Inflation is still the greatest risk to the United States economy, and policy-makers will not hesitate to raise interest rates again if incoming data suggests that is necessary, Dallas Federal Reserve Bank President Richard Fisher said Wednesday.

"There is a definite increase in inflationary momentum," Fisher told a real estate group.

"The Federal Reserve will not tolerate inflation," he added, terming it the Lex Luthor to the "Superman" United States economy, referring to the superhero's nemesis.

A sinister force

Inflation "is a sinister force that has the capacity to charm and romance the heck out of you, but in the end wreaks only havoc," he said.

Fisher is the first Fed policy-maker to speak publicly since the Federal Open Market Committee voted this month to hold U.S. benchmark interest rates steady at 5.25 per cent.

That decision, taken with a single dissenting vote, paused a string of rate hikes made at 17 consecutive meetings over more than two years.

Tightening cycle

Financial markets are split on whether the Fed will resume its tightening cycle.

Fisher said the Fed "will watch and listen and 'taste' the indicators as they come in."

"If we see, after this pause, that inflation is beginning to threaten economic prosperity, we will take deliberate ... measures to counter it," he said. Even so, "that doesn't mean we need to take a sledgehammer to the economy."

Fisher is not a voting member of the Fed's interest-rate setting committee in 2006.