Fed hawk wary of rate cut but another softens tone

By Alister Bull

ST. LOUIS (Reuters) - One top U.S. Federal Reserve official on Monday warned against another interest rate cut to offset the credit crisis, but a second policy-maker who has defied cuts all year said inflation was receding as a concern.

"I'm not as worried as I was before that we might, when the financial system was repaired, have ... inflationary pressure," Dallas Federal Reserve President Richard Fisher told a community bankers in Wichita Falls, Texas.

Fisher had dissented against monetary policy easing all year, although he voted with the rest of the U.S. central bank's interest rate-setting committee to keep rates on hold at 2 percent at their last meeting, on September 16.

Stock markets slid on Monday as investors digested the prospect of the credit crunch inflicting a lasting U.S. recession that curbs growth worldwide, despite a $700 billion U.S. taxpayer bailout agreed by Congress on Friday.

Financial futures markets currently imply the Fed will impose an emergency 50 basis point inter-meeting cut before the next scheduled gathering, October 28-29.

Fed Chairman Ben Bernanke may confirm or deny these suspicions in a speech that he is scheduled to give in Washington on Tuesday.

But St Louis Federal Reserve President James Bullard warned that another cut may do more harm than goods.

"I don't think lowering rates is the right tool for this environment," he told Reuters in an interview, reiterating a warning against further policy easing that he made last week.