FED PRESIDENT BULLARD: The Fed Should Start The Taper Small, But Pause If Inflation Doesn't Pick Up

Everyone in the world is listening for clues on how the Fed is thinking about tapering its monthly purchases of $85 billion worth of a bonds.

As usual, Bullard warned of low inflation.

"Inflation continues to surprise to the downside," he said.

This is a concern that often gets lost amid other encouraging economic metrics like jobs.

"A small taper might recognize labor market improvement while still providing the Committee the opportunity to carefully monitor inflation during the first half of 2014," Bullard said. "Should inflation not return toward target, the Committee could pause tapering at subsequent meetings."

Among other interesting comments he made, Bullard favored improving Fed communications via more press conferences.

"Markets have suggested that meetings without press conferences are unlikely to be situations where the Committee can take important action," Bullard noted.

All of this was accompanied with a brief presentation titled "Some Issues in Current U.S. Monetary Policy."