Speaking on Bloomberg Television, Bullard said the U.S. is in the worst quarter of the slowdown at the moment, but that he expects it to improve after the first quarter of 2009.

He said the risks of U.S. deflation are currently not that high, and that the Fed must act to control inflation expectations to keep them from being both too high and too low. He also said the decline in long-term U.S. government debt yields is a welcome development that could help mortgages.

Bullard noted that the Fed still has "plenty of tools" to use in this economic crisis and that "a lot of uncertainties" have been taken off the table. Though, he did say he's not "a fan" of unusually low rates and that it's "important" to provide an inflation target.

By Stephen Huebl, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, This email address is being protected from spam bots, you need Javascript enabled to view it

CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca

The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.

A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.