“My own forecast is that it would be a little closer to target by now, so I am a little bit nervous about the fact that inflation has been low and has been trending down,” Bullard said in London. “I would like to get some reassurance from the data that it’s going to turn around and go back toward target before we start tapering” bond purchases by the Fed.

Chairman Ben S. Bernanke said the U.S. economy remains hampered by high unemployment and government spending cuts, and raising interest rates or reducing asset purchases too quickly would endanger the recovery. Bullard, a voting member of the Federal Open Market Committee this year, said earlier this month that the Fed should keep up bond buying because it’s the best option for boosting growth.

In response to audience questions at an event hosted by the Official Monetary and Financial Institutions Forum, Bullard said any decision to taper the pace of quantitative easing “does depend on the data.” He added that labor markets “have been improving.”

Bullard told reporters after the event that while slowing purchases is the more likely course over time, increasing the pace of purchases remains an option if inflation falls further.

“Right now, I don’t think the deflation risk is very high in the U.S., but it will start to go up if inflation continues to decline,” he said.

Small Changes

Bullard told reporters any slowing in purchases should be done in “relatively small moves” just as changes in interest rates are typically in small increments. “You should only make moderate moves,” he said.

In prepared remarks at the event, Bullard said the Fed should “continue with the present quantitative easing program, adjusting the rate of purchases appropriately in view of incoming data on both real economic performance and inflation.”

Inflation as measured by the personal consumption expenditures price index rose 1 percent for the year ending March, below the central bank’s 2 percent goal.

Fed officials are debating how to eventually curtail asset purchases that have expanded its balance sheet to a record $3.35 trillion. The FOMC agreed May 1 to maintain monthly buying of $40 billion in mortgage securities and $45 billion of Treasurys to boost employment.

Purchase Pace

The FOMC said that day that it is prepared to accelerate or slow purchases in response to changes in the labor market and inflation. It also left unchanged its statement that it plans to hold its target interest rate near zero as long as unemployment remains above 6.5 percent and the outlook for inflation doesn’t exceed 2.5 percent.

“The reaction in financial markets clearly indicates that such purchases are effective in easing financial conditions,” Bullard said.

The traditional effects of easier monetary policy include higher inflation expectations, currency depreciation, higher equity valuations and lower real interest rates, according to the policy maker. “All of these have been associated with quantitative easing in the U.S.,” he said.