Europe weighs but Fed policy appropriate: Bullard

St. Louis Fed President James Bullard said in a speech to the Official Monetary and Financial Institutions Forum in London that he believes that "monetary policy is appropriately calibrated given the current macroeconomic situation."

Policymakers are coming to terms with the possibility the euro area sovereign debt crisis could be more painful and more protracted than previously believed, Bullard added.

"The most likely way forward continues to be a long period of debt paydown and sluggish growth, both in Europe and the U.S., and that the most pressing policy issue is to accept this path and prevent any additional problems from developing as we press ahead," he said.

Bullard, not a voter this year on the Fed's policy-making panel, is considered a centrist on the spectrum of Fed policymaker views that span advocates of aggressive action to boost growth to opponents of further central bank intervention.

The Fed cut benchmark rates to near zero in December 2008 and has bought $2.3 trillion in bonds to stimulate economic growth. It has promised conditionally to hold rates near zero until at least late 2014.

At its most recent meeting in June, the U.S. central bank extended a program that lengthens the average maturity of its bond portfolio in a bid to push down longer-term interest rates.

Many analysts believe that the Fed, faced with clear evidence the economic recovery has lost momentum, will launch another round of bond purchases in coming months. The Fed's next policy-setting meeting is July 31-August 1.

Bullard said it will take some time to see what impact the Fed's June renewal of the maturity extension program, informally called "Operation Twist," will have on the U.S. economy.

"Given the lags in the effects of monetary policy, it will now take some time to see the impact of this action and to see whether or not the economy can meet the current set of expectations on performance during the remainder of 2012," he said.

(Reporting By Ana Nicolaci Da Costa, writing by Mark Felsenthal; editing by Patrick Graham)