Another Fed official talks tough on inflation
President of St. Louis Federal Reserve says central bank needs to keep inflation contained, hints that interest rates may stay steady for a while.
NEW YORK (CNNMoney.com) -- Another Fed official is talking tough about inflation, hinting that the Fed is now more concerned with keeping prices from soaring out of control than an economic slowdown.
James Bullard, President of the Federal Reserve Bank of St. Louis, said in a speech in St. Louis Wednesday that inflation remains a top concern for the central bank.
"If inflation remains elevated, inflation expectations will begin to move higher," Bullard said. "Market participants, businesses, and consumers will come to view higher inflation as part of the economic landscape, in part because of doubts about the Fed's ability and willingness to keep inflation contained."
Bullard said if expectations of rising prices are allowed to continue, the tide of inflation will be difficult to reverse.
As a result, Bullard said he thinks the Fed should leave interest rates unchanged for the foreseeable future. The central bank has lowered its key federal funds rate seven times since last September.
"My view is that policy is appropriately calibrated at this time, given the current economic environment and the outlook for the next 18 months," said Bullard. "I see several reasons why maintaining the current policy is a good option for now."
The Fed's next policy-making committee meeting is a two-day session that concludes on June 25. Bullard, however, does not have a vote at this meeting..
The federal funds rate now stands at 2%. And when the Fed announced its last rate cut in April, the central bank hinted that it would halt its rate-cutting campaign in an effort to stem the tide of inflation.
The Fed has been in a tough spot during the past few months. Although some believe the series of rate cuts have helped prevent the credit crunch on Wall Street from deepening further, the cuts have also contributed to the weakness in the dollar and rising commodity prices.
Bullard is the latest Fed official to talk tough inflation in recent weeks. Last week, Fed chairman Ben Bernanke explicitly supported a stronger dollar.
Monday, Federal Reserve Bank of New York president Timothy Geithner said following a speech in New York that "tighter monetary policy" from central banks around the globe may be needed. And at a speech in Boston Monday night, Bernanke hinted that the Fed's rate-cutting campaign has come to a close. 
