Dec 18 (Reuters) - The Federal Reserve is not precommiting to cutting interest rates soon and swiftly, and the jump in market expectations that it will do so is at odds with how the U.S. central bank functions, Chicago Fed President Austan Goolsbee said on Monday.

"It's not what you say or what the (Fed) Chair says, it's what do they hear and what do they want to hear?" Goolsbee said in an interview with broadcaster CNBC, in reference to the response of financial markets to Fed Chair Jerome Powell's comments last week that the time frame for when rate cuts will start was beginning to "come into view."

"I was confused a bit ... was the market just imputing 'Here's what we want them to be saying.' I thought there seemed to be some confusion about how the FOMC (Federal Open Market Committee) even works. We don't debate specific policies speculatively about the future," he said, talking about the rate-setting committee's method of deliberations.

Bets that the Fed will lower its benchmark overnight interest rate at its March meeting by a quarter of a percentage point soared last week after the U.S. central bank left its policy rate unchanged in the 5.25%-5.50% range and officials forecast three-quarters of a percentage point in cuts next year.

Earlier on Monday, Cleveland Fed President Loretta Mester, who has a vote on policy in 2024 until she retires in June, also pushed back against financial market expectations of how abruptly the central bank will pivot to rate cuts.

That has yet to stop markets from pricing in more cuts than the Fed expects next year, and traders in federal fund futures have maintained their surge in bets for a cut in March. They still see a roughly 75% probability of a cut at that meeting, according to CME Group's FedWatch Tool, while bond yields continue to drift lower.

"The next phase is not when to reduce rates, even though that's where the markets are at. It's about how long do we need monetary policy to remain restrictive in order to be assured that inflation is on that sustainable and timely path back to 2%," Mester told the Financial Times in an interview.

"The markets are a little bit ahead. They jumped to the end part, which is 'We're going to normalize quickly', and I don't see that." "The markets are a little bit ahead," she added.

On Friday, two other U.S. central bank officials, the New York Fed's John Williams and Atlanta Fed's Raphael Bostic, who will both have a vote on the rate-setting committee next year, also tried to temper market expectations that cuts to the Fed's policy rate will inevitably begin in March.

However, in a separate interview with the Wall Street Journal on Friday, Goolsbee warned that the Fed may soon need to shift its focus to preventing a run-up in unemployment from fighting higher prices as inflation makes progress in returning to the central bank's 2% target, and he did not rule out a cut as early as the March meeting. (Reporting by Lindsay Dunsmuir; Editing by Chizu Nomiyama and Paul Simao)