By Howard Schneider and Lindsay Dunsmuir

WASHINGTON (Reuters) -U.S. Federal Reserve officials on Monday sloughed off rising volatility in global markets, from slumping U.S. stocks to currency turbulence abroad, and said their priority remained controlling domestic inflation.

Asked at a Washington Post event whether he felt U.S. investors had taken an overly optimistic view of Fed policy until a recent sharp sell-off begin, Atlanta Fed president Raphael Bostic said that was beside the point.

“I don’t know whether they’re too optimistic or not optimistic enough … The more important thing is that we need to get inflation under control,” Bostic said. “Until that happens we’re going to see I think a lot of volatility in the marketplace in all directions.”That applied as well to the recent upheaval in the United Kingdom. Tax cuts proposed by the government of new British Prime Minister Liz Truss, with their potential to further stoke inflation, raised the prospect that the country’s fiscal policy will conflict with efforts by the Bank of England to tame price increases with higher interest rates. [L1N30X0A4]

The mixed signals have sent the pound into a tailspin, adding another dose of volatility to world financial markets already coping with Federal Reserve interest rate increases moving faster and higher than anticipated.

“The reaction to the proposed plan is a real concern,” showing increased uncertainty about the U.K.’s economic prospects, Bostic said. “The key question will be what does this mean for ultimately weakening the European economy, which is an important consideration for how the U.S. economy is going to perform.”

In separate remarks to the Greater Boston Chamber of Commerce, Boston Fed president Susan Collins echoed the Fed’s consensus that the fight to cool the current bout of inflation was paramount.

“At the moment, inflation remains too high,” Collins said in her first policy remarks since becoming head of the bank.

While she said she felt the pace of price increases may be at or neat its peak, “returning inflation to target will require further tightening” of credit conditions, which the Fed influences through increases to its target federal funds rate.

The Fed maintains a 2% inflation target, as measured by the personal consumptions expenditures price index. As of July that index was increasing at a more than 6% annual rate. Data for August will be released on Friday.

The U.S. central bank last week approved a third consecutive rate hike of three-quarters of a percentage point. It has now raised its policy rate a total of three percentage points this year, marking one of its faster efforts ever to raise borrowing costs and slow the economy.

In recent weeks, Fed officials, in their commentary about policy and in their actions at Fed meetings, have been adamant that they will push rates as far as needed to cool inflation – even at the cost of rising unemployment and a possible recession.

Some sectors of the economy have felt the hit already, with mortgages on home loans doubling to more than 6%.

In recent weeks equity markets have reflected a broader repricing against the possibility of U.S. interest rates returning to levels not seen in a decade and remaining there.

The S&P 500 is down 12% just in the month that Fed chair Jerome Powell delivered a stern message at a central bank symposium in Wyoming about the economic “pain” required to curb the fastest price increases since the 1980s.

Fed officials have often been accused of coddling financial markets, but have given little indication the current sell-off will cause them to reconsider their policy plans as long as prices and wages continue soaring, and the job market remains strong.

“The U.S. economy functions best when there’s confidence about … its trajectory over the short and medium term,” Bostic said. “High inflation undermines that.”

(Reporting by Howard Schneider; Editing by Paul Simao and Nick Zieminski)