By Howard Schneider

WASHINGTON (Reuters) -Federal Reserve Vice Chair Philip Jefferson said on Thursday he will be looking across a broad set of economic indicators to convince him it is time to cut interest rates, rather than focusing on a single metric.

"I'm not just looking at one indicator to indicate whether or not that's the time to start," Jefferson said in a presentation to the Peterson Institute for International Economics. "I think there would have to be a body of evidence about macroeconomic performance that would then weigh in the direction of okay, now is the time."

"I am looking at the totality of the data in the economy," he said. "Labor markets, growth, productivity on the real side and inflation on the price side. I don't think it's necessarily one thing that we would have to see before we think about cutting. I think we want to see evidence that inflation is sustainably at or going toward our target level."

In his prepared remarks and a question-and-answer session, Jefferson did not indicate when he thought the Fed's policy easing might begin.

He said, however, that he remained "cautiously optimistic" about the U.S. central bank's progress in bringing inflation back down to its 2% target.

Fed staff estimates, he said, show the central bank's preferred measure of inflation, the personal consumption expenditures price index, rose 2.4% over the 12 months through January, with prices stripped of volatile food and energy costs increasing 2.8% - a continuing decline that is edging towards the central bank's target.

The actual data will be released next week, but Jefferson said the staff estimates indicate that a "pronounced" drop in inflation continues and should let the Fed reduce interest rates later this year.

"I remain cautiously optimistic about our progress on inflation," Jefferson said. "If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back our policy restraint later this year."

The Fed held its benchmark overnight interest rate steady in the 5.25%-5.50% range at its policy meeting last month, and minutes of that session showed broad consensus that more evidence of falling inflation is needed before it can be lowered. Investors currently expect the first rate cut in June.

Jefferson, still early in his tenure as the Fed's top policy spokesperson, cited among the risks to his outlook the possibility that strong consumer spending "could cause inflation to stall," weakening job growth might warrant earlier rate cuts, or outside shocks might push up prices.

He did not, however, lean into any of those risks as his base case, or indicate when he thinks the Fed might find the confidence it needs to begin cutting rates.

Jefferson instead devoted much of his talk to reviews of past monetary easing cycles, including a mid-1990s episode when the Fed cut rates in response to easing inflation - rather than an economic weakening - that might be the best parallel to the current situation.

(Reporting by Howard Schneider; Editing by Paul Simao)