The U.S. Federal Reserve will have difficulty raising interest rates significantly beyond the settings of its Japanese and European counterparts, which are still pursuing accommodative policy, St. Louis Fed President James Bullard said on Tuesday.

Bullard, who has previously flagged the need for a caution in raising rates, told reporters on the sidelines of a seminar in Tokyo on Tuesday the Fed had enough tools and policy options to respond if the U.S. economy falls into a recession.

He said in a speech earlier in the day that U.S. interest rates may have already hit the “neutral” level that neither encourages nor discourages economic activity.

“It is hard for U.S. rates to get too far out of line with the global rate situation, and obviously both the (Bank of Japan) and the (European Central Bank) are continuing very accommodative policies,” Bullard told reporters.

“Is it constraining? It is in the sense that there is a global equilibrium of rates and if you get too far out of line things have to happen, exchange rates have to move, and other things have to happen.”

Bullard said he did not want to prejudge the Fed’s next meeting in June, but he reiterated his view that the Fed does not need to raise interest rates further because inflation expectations are low.

The Fed held interest rates steady in a target range of between 1.50 percent and 1.75 percent on May 2.

The U.S. central bank is expected to raise rates in June, and continue a gradual series of increases until perhaps the middle of next year.

In prepared remarks, Bullard repeated his views that inflation expectations remain a bit below the Fed’s 2 percent inflation target, and that interest rates worldwide are being held down by longer-term economic and demographic trends.

There are “a few reasons for caution” in further rate increases, said Bullard, who has argued before that the Fed should halt its rate raising cycle until it is clear that economic growth and inflation have moved into a higher gear.

If the current policy rate is at neutral, “it may not be necessary to change the policy rate” in order to keep the economy close to or at the Fed’s goal, Bullard said.

Holding off on further rate increases, he said, would help improve market-based measures of inflation expectations and make the Fed’s commitment to meeting its inflation target more credible. It would also lower risks that short-term interest rates might rise above long-term ones, an “inversion” of the yield curve that has often preceded a recession.

When asked whether the BOJ should change its 2 percent inflation target, Bullard said he saw no need for a change because 2 percent inflation has become a global standard for price targeting.

He added that a central bank that changed its inflation target from 2 percent effectively commits itself to a significant change in its currency level, due to the consequent shift in interest rate expectations.