In a speech at a NewYork event, Bullard said that the U.S. economy was strng enough to withstand an increase in short-term rates, given that growth is expected to pick up over the next few quarters. He said that Fed was close to achieving its employment and inflation targets and that he favored a rate increase in the first quarter of 2015.
"I'm starting to think the economy could tolerate at least a little bit of the central bank getting back to a more normal stance," Bullard said.
Bullard said investors would be wise to listen carefully to the guidance given by the Federal Open Market Committee and that many investors and some Fed officials were stuck in 2010 and not understanding how the Fed was reaching its targets.
"Yes, it is a dovish committee, but I don't think investors should be pricing in an even more dovish committee than we've already got," Bullard said.
"I don't think financial markets have internalized how close we are to our ultimate goals, and I don't think the FOMC has internalized how close we are," he added.
Bullard said that the market was smart to not overreact to news last week that the U.S. economy experienced a 2.9 percent contraction in the first quarter and he personally felt that the economy was doing "pretty good."
"I am starting to think the economy could tolerate at least a little bit of the central bank getting back to a more normal stance," Bullard said.
After the last FOMC meeting, held on June 17-18, members said that inflation would reach 1.13 percent at the end of 2015 and 2.5 percent at the end of the following year.
When inflation moves above target, this will cause the discussion among Fed officials to "heat up," Bullard said.
Bullard is not a voting member on the committee this year but his views do have an effect on markets.