By Divya Chowdhury and Lisa Pauline Mattackal

The U.S. Federal Reserve is unlikely to provide clear signals on whether it will pause interest rate hikes or consider cutting rates, barring severe economic weakness or disinflation, former central bankers said on Tuesday.

Fed Chair Jerome Powell signaled that further interest rate increases were still on the table in his speech last week at the Jackson Hole Symposium despite noting that progress on inflation had been made. That left investors guessing about when the U.S. central bank might pause its hiking cycle or if it might begin cutting rates next year.

"If (the Fed) wants to do its job, it almost surely has to keep in the state of 'nobody quite knows whether it's paused or not'," said Raghuram Rajan, former governor of the Reserve Bank of India.

"If it finds that it hasn't controlled inflation and has to start raising again, it has egg on its face. On the flip side, the moment it says 'pause', financial markets are going to start celebrating," Rajan told the Reuters Global Markets Forum (GMF).

Powell's Jackson Hole presentation was effective because it left the bank's policy options open, said Dennis Lockhart, former president of the Atlanta Fed.

"He was ever so slightly hawkish and very, very pragmatic ... not really giving much guidance in terms of even another rate cut, although clearly he doesn't rule that out at all," Lockhart said.

The Fed's economic projections earlier this year showed one more expected rate increase by end-2023 and rate cuts beginning in 2024, but both Rajan and Lockhart saw cuts as unlikely barring sustained economic weakness or disinflation.

While significant falls in financial markets would increase pressure on the Fed to cut rates, Rajan said, the situation would have to be "pretty calamitous."

"They will be looking for evidence the disinflationary trend is sustainable, and the economy and employment picture is perhaps moving to an undesired level of weakness," Lockhart added.

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(Reporting by Lisa Mattackal and Mehnaz Yasmin in Bengaluru, Divya Chowdhury and Savio Shetty in Mumbai; Editing by Cynthia Osterman)