By Mark Felsenthal
ST. LOUIS (Reuters) - Two top Federal Reserve officials, including a policy centrist, said on Friday the central bank should hold off buying more bonds to boost growth given a strengthening in the economy.
"The data has been stronger in recent weeks and months, and so I think there's probably a good case to stand pat for now," St. Louis Federal Reserve Bank President James Bullard told reporters after a speech here.
"If the economy did deteriorate substantially in 2012, then I think (quantitative easing) would come back on the table, but that's not where we are right now," said Bullard, who is viewed as being in the middle when it comes to Fed policy debates.
The spectrum was on display on Friday as officials honed arguments ahead of a January 24-25 policy meeting.
The central bank is expected to provide more information about the expected path of interest rates and perhaps lay out an explicit inflation target, but it is not expected to announce a further round of asset purchases.
The Fed cut overnight interest rates to zero in December 2008 and has bought $2.3 trillion in government and mortgage-related bonds in a further effort to spur growth after the worst recession in decades.
Several Fed officials, including the influential head of the New York Fed, have suggested in recent days that further bond buys may need to be considered, but Bullard's reticence suggests that is a debate for another day.
While the economy appeared to strengthen toward the end of last year, analysts believe growth will soften again in 2012.
Richmond Fed President Jeffrey Lacker, one of the officials most skeptical of the need for more bond purchases, warned that further easing would lead to higher inflation without additional economic growth.
"Given the data I've seen, I'm still where I was a month or two ago when I said I didn't see a compelling case for further stimulus," he told reporters after a speech in Richmond, Virginia.
Lacker is a voter on the central bank's policy-setting Federal Open Market Committee this year, while Bullard is not.
WARY EYE ON INFLATION
Speaking earlier to a group of financial sector executives, Lacker said U.S. inflation will probably hover around 2 percent this year but that prices could rise even more. Most Fed officials want to aim for inflation around 2 percent or a littler lower, while Lacker wants to aim for 1.5 percent.
Lacker reiterated his forecast for the U.S. economy to expand between 2 percent and 2.5 percent in 2012. He acknowledged a more pronounced recession in Europe could significantly dampen U.S. prospects.
At the other end of the policymaking extreme, Chicago Fed President Charles Evans said the central bank could bring the U.S. economy back to full health one or two years quick if it acted "very aggressively."
The central bank should purchase more bonds if the labor market does not make sufficient progress quickly enough, he said in Carmel, Indiana, adding that mortgage-related securities would be a "perfectly fine" option.
"We want to make sure we have enough accommodation in there so that we give it a chance," Evans said.
The comments from Evans suggest there will be a lively debate when Fed officials gather.
Evans, who does not have a vote on the Fed's policy-setting committee, said he was worried that improvement in the labor market could be "transitory" and that unemployment could even rise slightly in the next few months.
U.S. hiring accelerated in December and the jobless rate fell to a near three-year low of 8.5 percent.
(Additional reporting by Pedro Nicolaci da Costa in Richmond, Virginia; Jonathan Spicer in Carmel, Indiana; and Edwin Chan in Santa Barbara, California; Editing by Chizu Nomiyama)