The Federal Reserve may need to ramp up its purchases of U.S. Treasury debt if price levels in the U.S. economy continue to show signs of softening, St. Louis Fed President James Bullard said on Thursday.

Bullard said such actions were not yet warranted at the moment, given expectations for a continued economic expansion.

But he added that, if further signs of easing price pressures were to emerge, the central bank should not be shy about using the remaining tools in its policy arsenal.

"Should economic developments suggest increased disinflation risk, purchases of Treasury securities in excess of those required to keep the size of the balance sheet constant may be warranted," he said in prepared remarks.

In a significant policy shift last week, the Fed announced it would begin using the proceeds from maturing mortgage securities in its portfolio to buy Treasury notes, an effort to prevent monetary conditions from tightening.

The move was aimed at sustaining an economic recovery that looks increasingly troubled, with persistently high unemployment and a battered housing market denting consumer confidence and inhibiting business investment.

Bullard suggested this was enough for now, taking comfort in inflation expectations that he described as low but manageable. Any additional Treasury buying should be undertaken in a measured, deliberate manner, he said, commensurate with the magnitude of the deflation threat.

"Large, sudden purchases rarely are optimal," he said. "'Shock and awe' is almost never a good way to proceed."

In response to the worst financial crisis since the Great Depression, the Fed not only slashed interest rates close to zero but also bought over $1.5 trillion in mortgage and Treasury securities.

Following a deep recession, the U.S. economy has been growing for four straight quarters. However, the expansion was already losing steam in the second quarter, and many fear the second half of the year will be even more lackluster.

Against that backdrop, core inflation measures, which exclude volatile food and energy prices and are therefore favored by Fed officials, remain stuck at their lowest levels in over 40 years.

Once seen as an inflation hawk, Bullard rattled financial markets last month when he flagged a growing risk of deflation, a damaging vicious cycle of falling prices and wages that has plagued Japan for about two decades.

At the time, Bullard argued in an academic paper that the Fed's commitment to keeping interest rates at very low levels for an extended period might actually increase rather than abate the threat of deflation if it leads consumers and businesses to anticipate lower prices in future.

Bullard said Europe's debt crisis, which dominated attention in financial markets during spring, appeared to have receded.