PRAGUE, Czech Republic — The Federal Reserve Board could begin to normalize monetary policy even as great global uncertainty persists, Federal Reserve Bank of St. Louis president James Bullard suggested Tuesday.

“The exit strategy was widely discussed in 2010, and that debate will likely revive during 2011,” he said in a panel discussion at the 19th European Banking and Financial Forum here, according to a summary of remarks that were released in advance.

“Discussion of the normalization of U.S. policy will likely return as the key issue in 2011,” Bullard added.

Noting the improved economic outlook since the Fed’s Quantitative Easing 2 program was implemented, he said: “The natural debate is how and when the exit should begin. However, additional uncertainty has clouded this picture.”

“In recent weeks, macroeconomic uncertainty has been on the rise from four key sources,” Bullard said.

He cited turmoil in the Middle East and North Africa and the associated uncertainty premium in oil prices; the twin natural disasters and the damaged nuclear reactors in Japan; continued uncertainty regarding resolution of the European sovereign debt crisis; and the U.S. fiscal situation and possibility of a government shutdown.

Bullard argued that all four situations have the potential to escalate. If escalation occurs, how and when to begin normalizing monetary policy would become less clear, he said.

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