(Adds Waller's inflation outlook)
By Jonnelle Marte
Aug 5 (Reuters) - The U.S. economic recovery is progressing rapidly, the labor market is improving and it may be possible for the Federal Reserve to start withdrawing its accommodative monetary policy sooner than some expect, Fed Governor Christopher Waller said on Thursday.
"My outlook is very much that the economy is going to recover," Waller said during a virtual event organized by the American Enterprise Institute think tank. "We will be able to pull back on accommodative monetary policy potentially sooner than others think."
Waller said he has "high hopes" for the July jobs report to be released on Friday and for the August report that will be released next month. He repeated his view that it is possible that the U.S. labor market will have recovered about 85% of the jobs lost during the COVID-19 pandemic by September after accounting for close to 2 million people who retired during the public health crisis.
On inflation, the policymaker said he expects recent inflationary pressures will be transitory but said there is a risk that it lasts longer than expected.
Waller said he is concerned because some business owners say they are having no problems passing down higher costs to consumers in the form of higher prices. Still, he said his base case is that prices will come down.
"My base case is that the inflation we're seeing is somewhat transitory, that there will be some relief in the fourth quarter of this year on price pressures," Waller said.
On Monday, Waller said the Fed could start to reduce its support for the economy by October if the next two monthly jobs reports each show employment rising by 800,000 to 1 million, as he expects. He said then that the Fed should "go early and go fast" when reducing its asset purchases from the current pace of $120 billion a month so policymakers could be in a position to raise rates in 2022 if needed. (Reporting by Jonnelle Marte in New York; Editing by Jonathan Oatis and Andrea Ricci)