RALEIGH, N.C. Tue Feb 10, 2015 1:02pm EST

The Federal Reserve should raise interest rates in June, a top Fed official said on Tuesday, saying the U.S. economy is strengthening and that inflation will move back to the central bank's target.

"At this point, I think June looks like the attractive option" to raise interest rates, Richmond Fed President Jeffrey Lacker told reporters here. "The data could change that, but it would have to be surprising data for me."

While Lacker is an inflation hawk who has pushed the Fed to move sooner with raising rates, his call for lifting off in June is the first time he has specified the month.

Lacker's comments came as San Francisco Federal Reserve Bank President John Williams told the Financial Times economic conditions are “getting closer and closer to those where it makes sense to really start thinking seriously about starting this process of normalization.”

The Federal Reserve has kept rates near zero since 2008 to stimulate the U.S. economy, which has seen steady job growth and a drop in its unemployment rate.

Whether the Fed is prepared to move in June is the subject of debate between economists and investors. Fed officials have indicated that they plan to hike later this year, with June as a possible target date, but Fed fund futures contracts indicate that investors expect the central bank to move later.

U.S. Treasury bonds sank last week, in part after an unexpectedly strong U.S. jobs report on Friday that suggested to many investors the Fed was indeed closer to raising short-term rates. Treasury debt prices fell on Tuesday, bumping benchmark 10-year yields above 2 percent for the first time in a month as investors positioned for a possible hike and big government bond auctions.

Lacker, who is a voting member on the Fed's policy setting committee this year, said that going back a year, he believed the central bank should hike in the first half of this year, a stance he said that has only been affirmed by rapid U.S.economic growth that is moving at a sustainable pace.

The FT said Williams said the Fed might have to hike borrowing costs "much more dramatically" than otherwise if it waited too long, saying it was better to move sooner and raise rates "gradually, thoughtfully."

In the interview, Williams made clear he felt the inflation-dampening impact of falling oil prices and a strong dollar would fade.

"Those influences will wane and this basic force of a strong labor market, strong economy, will ... become the dominant theme, and to my mind push wages up to 3-3.5 percent and push inflation back to 2 percent,” he said.

Williams said the question of whether to raise rates in June or later would be "in play" at that point, but did not commit to voting for a move at that time, the Financial Times said.

AUDIT

Lacker, a veteran of the Richmond Fed since 1989, weighed in on the "Audit the Fed" movement that has re-surfaced on Capitol Hill, with Senator Rand Paul re-introducing the bill.

Several Fed officials, including Fed Governor Jerome Powell on Monday, have spoken out against the audit bill, saying the Fed is already audited, and only its monetary policy decisions remain exempt.

"I think cooler heads will prevail ultimately, but it could result in pressure on us and the administration on a variety of fronts," Lacker said, referring to whether the bill would move through the approval process.

"To my mind, if you look at the nuts and bolts of what it does, it facilitates high frequency harassment on our decision making - our monetary policy decision-making," Lacker said.