NEW YORK (BLOOMBERG) - The Federal Reserve may need to cut US interest rates soon to prop up inflation and counter downside economic risks from an escalating trade war, St. Louis Fed President James Bullard said.

"A downward policy rate adjustment may be warranted soon to help re-center inflation and inflation expectations at target and also to provide some insurance in case of a sharper-than-expected slowdown," Bullard said on Monday (June 3) in remarks prepared for a talk in Chicago. "The direct effects of trade restrictions on the US economy are relatively small, but the effects through global financial markets may be larger."

Bullard's comments mark the first time a Fed official has publicly suggested the need for a rate cut since the central bank put rates on hold in January when it pledged to be "patient" as it weighed headwinds from slower global growth and the fallout from the trade war.

While US President Donald Trump has called for a one-percentage point cut, and investors deepened bets on policy easing after he threatened Mexico last week with tariffs, other Fed officials have stressed that their approach to policy is still appropriate. That was the message earlier on Monday from San Francisco Fed chief Mary Daly in Singapore, though Fed vice chair Richard Clarida opened the door to a cut in remarks on Thursday that stressed policy makers were watching risks to the outlook.

One of the most dovish members of the Fed, Bullard is a voter this year on the rate-setting Federal Open Market Committee, which meets next June 18-19 in Washington.

Minneapolis Fed President Neel Kashkari, who along with Bullard has most vocally opposed higher rates in recent years, said Friday during a Bloomberg TV interview that he was "not quite there yet" on the need for easing. Bullard said recently that a rate cut was premature.

The S&P 500 index of US stocks extended losses Monday in early trading, taking it 7 per cent below the record high achieved on April 30 amid weaker US economic data and increasing concerns about Trump's threats to further restrict global trade.

Fed officials are also worried about low inflation, which has persistently undershot their 2% target throughout most of the current economic expansion, and its effect on inflation expectations. They will gather with leading academics on Tuesday and Wednesday at a conference in Chicago to debate the problem.

"Financial markets appear to expect less growth and less inflation going forward than the FOMC does, a signal that the policy-rate setting may be too restrictive for the current environment," Bullard said. "Even if the sharper-than-expected slowdown does not materialize, a rate cut would only mean that inflation and inflation expectations return to target more rapidly."

Talking to reporters after his speech, Bullard cited low inflation as well as trade and a "more serious" inverted yield curve as reasons for a possible rate cut.

He declined to discuss the size of a cut he has in mind or if he's pushing for a move at the FOMC's upcoming meeting.

"I wouldn't want to prejudge the June meeting," he said. "I'd be anxious to hear what my colleagues think."