PALO ALTO, Calif. (Reuters) – The Federal Reserve may need to cut interest rates to boost inflation and regain credibility if inflation remains sluggish beyond the second quarter, St. Louis Federal Reserve Bank President James Bullard said on Friday.

“I certainly would be open to a cut,” Bullard told Reuters in an interview on the sidelines of a monetary policy conference at the Hoover Institution at Stanford University.

Bullard voted with the rest of the Fed’s policymakers on Wednesday to keep rates on hold, a move he said was justified because the Fed already made a “huge” policy shift in January by taking off the table the expectation it would raise interest rates this year.

“If we go through the summer here and inflation expectations are still too low and actual inflation doesn’t seem to be picking up then I think the level of my concern would get more intense,” Bullard told Reuters in an interview.

“I am open to a rate cut to try to combat this – but it would be a rate cut not because of bad data on the U.S. economy – it would be a rate cut because we want to make sure that inflation expectations and eventually actual inflation is more consistent with our 2-percent target,” Bullard said.

In his view, he said, such a rate cut would not be insurance against a possible bad outcome, but rather a bid to boost Fed credibility along with inflation, and position the Fed to better fight future downturns.

“If you cut rates during boom times that would send a signal you are serious that you are trying to get inflation at 2 (percent) or above our target” of 2 percent. Cutting rates at a time that job growth is weak would be “less successful” at building such credibility, he said.

Still, he said, though the Fed’s policy stance is currently a “little bit tight,” cutting rates now would risk overdoing it on policy easing.

The Fed’s January shift has helped push down Treasury yields, he said. And though it has not yet had an obvious effect on inflation, which by the Fed’s preferred gauge recently came in at 1.6 percent, it might.

“You won’t know that until the July, August timeframe,” he said.

Meanwhile unemployment has sunk to a 50-year-low of 3.6 percent, a strong showing for the labor market that economists would normally expect to put upward pressure on inflation.