"We are on track to satisfy a lot of the conditions" for a rate increase, Dudley said. He added, though, that a key factor arguing for the Fed biding its time a little was the potential for market turmoil around Britain’s vote in late June about whether to leave the European Union.

Dudley's comments reinforced the drum beat from within the Fed in recent days that rate increases are coming soon, with a range of policymakers with normally varying views on monetary policy now stating the next policy meeting in June is firmly on the table.

Minutes of the Fed's April meeting, released on Wednesday, suggested most policymakers felt a rate increase could be needed in June, with officials saying they first wanted to see signs the economy was still strengthening.

The New York Fed chief said on Thursday he was "quite pleased" investors had increased bets on the likelihood that rate increases will come soon, echoing concerns expressed in the minutes by policymakers who do not want to catch Wall Street by surprise when they raise borrowing costs.

"If I am convinced that my own forecast is sort of on track, then I think a tightening in the summer, the June-July time frame is a reasonable expectation," said Dudley, a permanent voting member of the Fed's rate-setting committee.

Since the minutes were released, investors have shifted their bets on the next rate increase to July from September, according to CME Group calculations based on prices for Fed funds futures contracts. Those prices currently imply investors see a 30 percent chance rates will rise in June, up from 19 percent before the minutes were released.

The dollar <.DXY> extended gains against other currencies following Dudley's comments and U.S. stock prices fell further, suggesting investors continued to bet rate increases were around the corner.

The Fed raised interest rates last December after keeping them near zero for seven years to help the economy recover from a steep recession.

Dudley pointed out that the Fed's next meeting will be a week before Britain votes on whether to leave the European Union.

Opinion polls are giving conflicting messages on how Britons will vote on June 23. This week, an ORB telephone poll showed a 15 percentage point lead for the "In" campaign, while an online poll conducted by TNS showed the "Out" campaign with a three-point lead.

The event has the potential to create financial market turmoil which could make the Fed more cautious.

"We'll have to think about that in terms of... whether it makes sense to go in June or wait a little bit later," Dudley said.

In the United States the jobless rate, currently at 5 percent, is near what most economists consider full employment. Recent data including retail sales, housing starts and industrial production painted an upbeat picture at the start of the second quarter. New jobless claims fell last week, the Labor Department said on Thursday.

However, another report showed factory activity contracting in the mid-Atlantic region in May, hurt by the sluggish global economy which has made the Fed more cautious about lifting rates.

Fed officials have expressed concern in recent weeks and months that the economy is stuck in a state where even historically low rates of growth can fuel inflation.

The Fed's No. 2 official said on Thursday the country requires faster potential economic growth to lift the level the Fed's target rate needs to keep the economy at full employment with stable inflation.

"What we need most, now that we are near full employment and approaching our target inflation rate, is faster potential growth," Federal Reserve Vice Chairman Stanley Fischer told an economics conference in New York.

Fischer did not comment on the likelihood the Fed will raise rates again in June.

(Reporting by Lindsay Dunsmuir and Richard Leong; Additional reporting by Jason Lange in Washington; Editing by Meredith Mazzilli and Chizu Nomiyama)

By Lindsay Dunsmuir and Richard Leong