UPDATE 1-Clarida: Fed can tame inflation if needed without wrecking recovery

(Adds further comments from interview)

WASHINGTON, May 25 (Reuters) - The U.S. Federal Reserve can curb an outbreak of inflation should it occur without throwing the recovery off track, Fed vice chair Richard Clarida said on Tuesday, voicing faith in the central bank’s ability to engineer a “soft landing” if prices continue to escalate beyond what is expected.

The Fed feels the current rise in prices will ease on its own as the economy reopens, but “in the risk case where these pressures are more persistent and they put our price stability mandate at risk, we will recognize that and through our communications and our tools I think we will be able to offset that in a way that would be supportive of maintaining economic recovery,” Clarida said on Yahoo Finance.

Clarida spoke as Fed officials make a slight but noticeable shift in their discussion about when to begin debate over pulling back some of the crisis levels of support rolled out last spring to battle the pandemic, and specifically when to reduce its $120 billion in monthly purchases of government and mortgage-backed securities.

Two regional Federal Reserve bank presidents have publicly urged that discussion begin soon, and others have highlighted the risks should a current round of price increases become a more embedded cycle of inflation.

That has led some analysts to worry the Fed has become too relaxed about inflation -- and set the stage for a painful round of abrupt, inflation-fighting interest rate increases that could also push the economy back into recession.

Clarida, however, said the current Fed will be able to walk a line that has often eluded it in the past, curbing any outbreak of inflation with tough talk and more modest rate hikes that would allow economic growth to continue.

The Fed will get new inflation data on Friday, with forecasters expecting that prices for personal consumption goods excluding food and energy rose at a 2.9% annual rate in April. That would be the highest reading since June 1993, and beyond the Fed's 2% inflation target.

For now, however, Clarida said there was no need to rush into any talk of a bond "taper."

"It may well be...there will come a time in upcoming meetings we will be at the point where we can begin to discuss scaling back the pace of asset purchases," Clarida said. "That was not the focus of the April meeting. It is going to depend on the flow of data."

The Fed meets next on June 15-16 (Reporting by Howard Schneider Editing by Chizu Nomiyama)