James Bullard, president of the Federal Reserve Bank of St. Louis, used a speech in Murfreesboro, Tenn., today to deliver his first public remarks on the crisis in financial markets. Its effects on the economy, he said, are uncertain:

There is some possibility of a relatively benign outcome, where the financial market shakeout plays itself out and real economic performance is muted but not disastrous. But there is also some possibility of a very adverse outcome in which the entire economy is drawn into a protracted downturn.

Bullard, who proudly accepted the “inflation hawk” label when I interviewed him in July, said he remains concerned about rising prices. The fact that the federal funds rate – the overnight interest rate targeted by the Federal Reserve — is below the inflation rate remains “a key concern,” Bullard said. He concluded:

If financial market turmoil can be contained, the FOMC can turn attention to achieving better inflation results than those recently experienced. Until inflation clearly moderates, my colleagues and I will need to be especially watchful that our accommodative policy stance does not begin to worsen the outlook for long-run price stability.