WASHINGTON (Reuters) - The Federal Reserve must "react decisively" to stop inflation pushing up wages, one of its top policy-makers said on Tuesday, dropping a clear hint about the possibility of interest-rate hikes ahead.

"Let me emphasize that I'm taking the recent inflationary pressures very seriously," Federal Reserve Bank of Atlanta President Dennis Lockhart said in prepared remarks to a panel discussion on the U.S. economy at Georgetown University.

A copy of his speech was made available to the media before delivery.

Lockhart is not a voting member of the Fed's interest-rate setting committee this year, but will vote on policy in 2009.

"For that reason, in my view, the current set of circumstances calls for being especially vigilant and attentive to public and business psychology as regards costs and prices.

"Policy needs to react decisively against signs of the onset of formal compensating practices, including contracts, that treat inflation as a persistent reality -- in other words, something that must be lived with. Such signs are not apparent, and I don't expect them to materialize," he said.

The Fed halted an aggressive rate-cut campaign last week when it announced on June 25 that it held its benchmark fed fund rate target at 2 percent and warned that inflation had grown as a threat, while the downside risks to U.S. growth had receded.

NO NEED FOR HASTE

Lockhart's remarks will likely reinforce the sense among investors that the next move in rates will be up as the Fed acts to keep inflation at bay.

However, he leavened his warning on price pressures with comments about the still fragile state of financial markets, and the gradual nature of the economic recovery, that did not signal an imminent desire on his part for policy action.

Lockhart noted that first-half growth this year appeared to be coming in better than forecast and he said that it would probably achieve a pace of between 1 percent and 2 percent.

However, he noted that the second half of 2008 would probably not show much pickup from that level, while 2009 would continue this gradual recovery.

He also said that housing, whose problems triggered the collapse of the U.S. subprime mortgage market that unleashed a global credit crunch last August, might finally be healing.

"There are early and tentative signs that a bottom may be forming in some housing markets," he said.

U.S. exports were also aiding growth, in part due to the weaker dollar, Lockhart said.

However, he warned that the economy could still face a choppy ride and stressed that there was a lot of uncertainty.

In particular, financial markets outside of credit markets

for investment-grade corporations were still stressed and banking was feeling the pain.

"Interbank credit markets continue to be stressed, reflecting concern over exposure to still volatile and declining asset values.

"The banking system now exhibits some signs of stress at all levels -- large financial institutions, regional banks, and community banks," he said.