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WASHINGTON (MarketWatch) — Inflation might be too low and the Federal Reserve may need to respond, said James Bullard, the president of the St. Louis Fed Bank on Wednesday.

“Inflation is running very low,” as measured by the personal consumption expenditures prices index, Bullard said in a question-and-answer period after a speech at the Levy Economics Institute of Bard College.

“I’m getting concerned about that,” Bullard said, according to Dow Jones Newswires.

Prices of the 10-year benchmark Treasury note rose Wednesday, pushing yields down nearly 3 basis points to 1.699%. 

The Fed’s preferred measure of inflation, the personal consumption expenditures price index, increased at a 1.3% annual rate in February. This is well below the Fed’s target of 2%.

Earlier this week, an alternate measure of inflation, the consumer price index, posted a surprising 0.2% decline in March. The index rose at 1.5% annual rate, the slowest pace since last July.

Bullard’s comments suggest a growing risk of deflation, a general decline in prices.

The implication is that the Fed will continue its easy-policy stance, and perhaps augment it with other steps, said Michael Moran, chief U.S. economist at Daiwa Securities America Inc.

The Fed’s bond buying has been successful at keeping deflation at bay. It is designed to push down interest rates and boost asset prices, sparking demand that prevents prices from falling.

The asset purchases also influences inflation expectations, Moran said.

Bullard didn’t suggest any move to a more-stimulative policy. But he said the low inflation rate gives the Fed “room to maneuver,” a suggestion that there is no need to hurry to slow down the Fed’s asset purchases.

The Fed is buying $85 billion in Treasurys and mortgage-backed securities each month. Markets are focused on when the Fed might taper or end the purchases because many see this as the first sign that higher interest rates may be in the offing.

In his prepared remarks, Bullard said the goal of Fed policy should be to keep inflation close to its inflation target.

Bullard said new research has found it would be counterproductive for the Fed to “put more weight” on unemployment over price stability in its decision-making process.

Bullard noted that since 1995, the Fed has been following “New Keynesian” advice by keeping inflation close to a 2% target. The problem since the financial crisis is that the New Keynesian model doesn’t take unemployment into account.

Now, cutting-edge research that puts employment into these models has found that monetary policy alone can’t impact the labor market, he said. The best way to help the job market remains direct labor-market policies.

Bullard is a voting member of the Fed’s interest-rate-setting committee this year.