UPDATE 4-Fed’s Bullard: could trim bond buying by $100 bln

* Says Fed could then wait several meetings before more steps

* Says differences of opinion on tightening persist in Fed

* Bullard says waiting too long will bring inflation

(Adds context, details, quotes)

By Jan Lopatka and Michael Winfrey

PRAGUE, March 29 (Reuters) – St. Louis Federal Reserve chief
James Bullard urged the U.S. central bank on Tuesday to begin
reversing its campaign of monetary easing, saying it could trim
its $600 billion bond-buying programme by $100 billion.

Bullard, who does not have a vote on Fed policy this year,
added that U.S. policymakers may not be willing or able to wait
for all global uncertainties to be resolved before they begin
normalising their very loose monetary policy.

“One of the things that I’m concerned about is that policy
is so easy right now that we have to get started on the process
of getting back to normal because it will take a long time,”
Bullard told reporters on the sidelines of an economic
conference in Prague on Tuesday.

When asked if he thought that process should begin now, he
said: “Yes, we’re still buying treasuries. We’re feeding the
fire at this moment.”

Bullard, seen as a centrist on the policy-setting committee,
said the Fed could start tapering off its asset purchases and
then pause for several policy meetings before taking further
tightening steps.

His comments contrasted with comments from other senior Fed
officials who have said this week only that they did not see a
need for another round of asset buying.

Bullard’s comments drove the euro to a session low against
the dollar. The single European currency (EUR=: Quote, Profile, Research) was trading bid
at 1.4060 at 1315 GMT.

He added that there was a difference of opinion on the speed
of reversing monetary easing and cutting back the asset
purchasing programme.

“I think it could be on the order of $100 billion less than
what we had initially thought, but I would leave that up to how
the rest of the committee would want,” Bullard told reporters.

Still, analysts say it is highly unlikely the Fed will stop
short of purchasing the full $600 billion in U.S. government
bonds, and top Fed officials said on Monday the economy still
needed support. [ID:nN28221312]
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For HIGHLIGHTS of Bullard's comments click on [ID:nLDE72S179] For TAKE-A-LOOK Fed news, click on [ID:nnFEDAHEAD] TAKE-A-LOOK on Fed and other Americas cbanks [ID:nN04140647] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Bullard said in late February that he would support scaling
back the central bank’s $600 billion bond buying programme in
light of a strengthening economy.

Even before the Fed launched the current round of monetary
easing in November, Bullard was arguing that the central bank
should move policy in increments of $100 billion worth of
securities purchases from meeting to meeting.

“We’re purchasing securities at a rapid rate. If we stop
that process and we just let the balance sheet stay at a high
level and keep the policy rate near zero, and keep our extended
period language, we could pause for a couple of meetings like
that,” he said on Tuesday.

“Then we could start to take other measures to start to
reduce the size of the balance sheet, to think about possible
language changes with the extended period, to eventually get the
policy rate off zero.”


Risks clouding the outlook include the turmoil in the Middle
East and North Africa, the aftermath of the Japanese tsunami,
the European sovereign debt crisis and the U.S. fiscal situation
and possibility of a government shutdown, Bullard said.

“Because we are so accommodative right now, the FOMC may not
be willing or able to wait until every single global uncertainty
is resolved before we can begin normalising policy,” he said.

“If we wait too long we will get a lot of inflation in the
United States and around the world.”

Still, he said that the most likely prospect was that the
main risks for the outlook would be resolved “without becoming
global macroeconomic shocks”.

The Fed has kept short-term interest rates near zero since
December 2008 and has bought more than $2 trillion in long-term
securities to push borrowing costs down further and boost
recovery from the 2007-2009 recession.

Bullard said that the process of normalising policy would
still leave unprecedented policy accommodation on the table, and
that growth prospects remained reasonably good and had improved
since last summer.

“As 2011 started we were about 18 months past the end of the
recession, and that’s about the kind of timing when I would
expect the economy to pick up and start growing fairly rapidly,”
he said.

But he said any failure to address the U.S. fiscal situation
would pose a risk to U.S. and global recovery.

President Barack Obama’s Democrats on Monday offered to cut
another $20 billion from the U.S. budget in an attempt to reach
a deal with congressional Republicans that would avert a
government shutdown. [ID:nLDE72S05T]
(Additional reporting by Jason Hovet; Editing by Hugh Lawson)

UPDATE 4-Fed’s Bullard: could trim bond buying by $100 bln