ST. LOUIS (Reuters) - Greece could exit the euro zone without doing deep damage to the U.S. and European economies if the transition is handled properly, a top Federal Reserve official said on Wednesday.
Concerns about a Greek exit have kept global financial markets under pressure in recent days.
"I'm one that thinks that Greece could exit, and it could be handled in an appropriate way without causing too much damage, either in Europe or in the U.S.," St. Louis Federal Reserve Bank President James Bullard told Reuters.
Bullard said he believes the European Central Bank is committed to backing the continent's brittle banking system, and therefore the risks to the U.S. economy are smaller than some analysts perceive.
Indeed, Bullard added he expects the U.S. economy to perform better than many forecasters anticipate and that the Fed will therefore need to raise interest rates in late 2013, not late 2014 as its policy committee is currently indicating.
Bullard is not currently a member of the Fed's rate-setting policy committee but will be next year.
He said the Fed does have additional ammunition if needed - for instance, in case the U.S. economy stumbles.
"If there was a sharp slowdown in the U.S. I do think we'd have further scope to take action, we'd be taking on more risk. but we could do it if the situation called for it," he said.
Bullard said he does not foresee any market turmoil with the late-June expiration of the central bank's latest effort to keep long-term borrowing costs down.
In response to a historic financial crisis and deep recession, the Fed cut benchmark interest rates to effectively zero and bought some $2.3 trillion in Treasury and mortgage securities.
Bullard said the Fed is considering additional ways to become more transparent in communicating its policy intentions, including producing quarterly reports on monetary policy rather than the current biannual report to Congress. Still, he said any new steps would take time, and should not be expected at the Fed's June meeting.
(Reporting by Mark Felsenthal; Writing by Tim Ahmann and Pedro da Costa; Editing by Chizu Nomiyama, Padraic Cassidy and Andrew Hay)