“A risk of remaining at the zero lower bound too long is that a significant asset-market bubble will develop,” Bullard said in prepared remarks in Washington on Wednesday. “If a bubble in a key asset market develops, history has shown that we have little ability to contain it,” he said, citing the housing bubble that preceded the last recession.

Bullard said the job market was near normal levels now and the economy overall was “much closer to normal.” The policy-setting Federal Open Market Committee was split at its meeting last month on when to begin raising rates from near zero. Several participants wanted to normalize policy starting in June, while others favored later in the year, according to minutes of the March 17-18 meeting.

Bullard is not a voting member of the FOMC this year.

“A gradual normalization would help to mitigate this risk while still providing significant monetary policy accommodation for the U.S. economy,” Bullard said at the Hyman P. Minsky Conference. “Such an approach may extend the expected length of the current economic expansion.”

Expectations for the first increase have been pushed back and financial markets now indicate the policy rate to top 50 basis points in the first quarter of 2016, Bullard said. That is later than the FOMC in its forecasts and the difference “will need to be reconciled at some point,” he said.

September Liftoff

A majority of economists in an April 3-9 Bloomberg survey forecast the first rate rise at the Fed’s September meeting. In two surveys conducted in March, a plurality of economists said the first increase would come at the Fed’s June meeting.

In March, the FOMC dropped a pledge to be “patient” as it considered the first rate rise since 2006, while also reducing forecasts for the path of increases. Fed Chair Janet Yellen has since said borrowing costs would probably be raised gradually, and a weak payrolls report has added to caution among officials.

Even so, “labor markets continue to improve and are approaching or even exceeding normal performance levels,” Bullard said. The unemployment rate is approaching normal and it is likely “unemployment will reach much lower levels,” he said.

Payrolls climbed by 126,000 in March, falling well short of expectations and breaking a yearlong string of monthly gains exceeding 200,000, a Labor Department report on April 3 showed.

Bullard said he expects inflation to return to the Fed’s target, though he expressed concern that price expectations have been influenced by the fall in oil.

“This bears careful watching,” he said. “Inflation and inflation expectations moving away from target is a concern.”

Prices as measured by the Fed’s preferred gauge rose just 0.3 percent in February from a year earlier, and inflation has languished below the central bank’s 2 percent goal for 34 straight months.