Speaking at the Wisconsin School of Business in Madison Wisconsin, newly appointed president of the St. Louis Fed James Bullard told a crowd that the Federal Reserve's rate cuts were pre-emptive and that patience is required.

Bullard, in his first speaking engagement since becoming the St. Louis Fed president, told the crowd, "Given the current economic environment and the outlook for the next 18 months, my view is that policy is appropriately calibrated at this time. I see several reasons why maintaining the current policy is a good option for now."

Bullard expressed his concern about the current inflation outlook in the U.S., specifically the headline inflation indicator.



"Forecasts of headline CPI inflation are more disturbing, with both the Blue Chip and the Survey of Professional Forecasters current forecasts in excess of 3 percent. These forecasts suggest that headline CPI inflation will moderate from its recent pace over the past six months, which is 4.5 percent. While heartening, this inflation outlook is still not consistent with my view of price stability," said Bullard.

Bullard went on to tell the crowd that it was too early to tell if the crisis was over, but did acknowledge that some tensions have eased. Bullard disavowed any further rate changes.

"The rate reductions were based on forecasts that economic activity would slow in the face of contracting housing activity and substantial turmoil in financial markets. Growth has indeed been slow, at least for the first half of 2008, but that cannot now be justification for further rate reductions," Bullard said.

By Steve Stecyk and edited by Cristina Markham