The U.S. economy has come through its recent soft patch and the Federal Reserve (search) still has some way to go to restore interest rates to more normal levels, Fed officials said on Monday.

With recent data pointing to an improvement in growth after a mid-year slowdown, central bankers offered no hint of a pause in their campaign to raise interest rates gradually toward levels more typical in an economic expansion.

Philadelphia Fed President Anthony Santomero, the first of five Fed speakers on Monday, said official interest rates near 45-year lows are not "sustainable or compatible" with a long-run U.S. expansion.

"I don't think we are yet at neutral, we still have a way to go," Santomero told reporters after a speech to the National Association for Business Economics (search) annual conference.

He was referring to a neutral interest rate, which neither boosts nor drags on economic growth.

Some others within the Fed have suggested neutral is between 3 percent and 5 percent, well above the current federal funds rate of 1.75 percent after three rate hikes this year.

Speaking at the same conference, Fed Governor Susan Schmidt Bies said the latest batch of U.S. economic figures showed the economy has gotten past its mid-year soft patch.

"I think the economic news in the last week suggests that we are coming out of the soft spot we went through. I think we are going to see a faster pace of economic growth this quarter," Bies told reporters.

In recent days, some private sector economists have revised third-quarter growth estimates upward after strong data on consumption and auto sales.

Most economists expect the Fed to continue on its course of gradual rate increases at the next policy meeting in November. However, mixed economic data over the summer spurred speculation the central bank could pause at one or more of its meetings thereafter.

Futures markets are pricing in a moderate 3.0 percent to 3.25 percent federal funds rate by the end of next year.

Bies also noted that inflation has moderated in the past three months, which she said was another "good signal" for the economy.

Inflation appeared to be flaring up earlier in the year, but Fed officials at the time said the jump seemed to be transitory. In recent months, price pressures have eased again, partly because companies have not been able to make price hikes stick in a competitive economy.

Still, the big uncertainty hanging over the economy remains the ever-surging oil price, which last week topped $50 a barrel and settled at $49.91 on Monday in New York.

Fed officials said the economy appeared to be withstanding high oil prices although they were weighing on economic growth.

"Obviously the oil prices are a drag at the current time. But we think the economy can accommodate them at their current levels as long as they don't rise substantially more," Fed Governor Ben Bernanke (search) said at a bankers' conference.

"There's a difference between rising and high. If oil prices remain at current levels, they will not be an ongoing drag. The economy will get adjusted to them," he added.

Santomero seemed to hold a similar view.

"What is quite remarkable is the ability of the economy to take these higher oil prices in its stride," Santomero said, noting the economy has recently returned to stronger growth.

To the extent that oil prices remain high, they will keep pressure on manufacturers and producers, but in a competitive economy, these pressures were not feeding through to core inflation, he said.

Santomero, who will be a voting member of the Fed's policy committee next year, said he had trimmed his economic growth forecast to 3.5 percent to 4.0 percent because of the soft patch in early summer that was attributed to the spike in oil.

Other Fed officials speaking on Monday, including Federal Reserve Governor Edward Gramlich and St. Louis Fed President William Poole, did not touch on the current state of the economy or interest rates.