Expansion is the most likely possibility going forward, despite the softening economy, Federal Reserve Bank of St. Louis president James Bullard said Thursday.
However, if economic developments suggest greater risk of disinflation, the Fed may need to buy more Treasury securities to expand its balance sheet.
Core inflation is at low but still manageable levels, and any additional quantitative easing undertaken by the Federal Open Market Committee should be a disciplined reaction to further disinflation risks, Bullard told a conference in Rogers, Ark.
"Large, sudden purchases rarely are optimal," he said. " 'Shock and awe' is almost never a good way to proceed."