PALO ALTO, Calif. St. Louis Federal Reserve Bank President James Bullard, an early and vocal supporter within the U.S. central bank of rapid interest-rate hikes to beat back soaring inflation, on Friday signaled guarded optimism that the effort is working.

"Monetary policy is now at the low end of what is arguably sufficiently restrictive given current macroeconomic conditions," Bullard said in remarks prepared for delivery to a monetary policy conference at the Hoover Institution.

The pandemic government aid that helped fuel high inflation is mostly spent, and the Fed policy rate, which was near zero 14 months ago, is now at 5%-5.25% and beginning to drag on the economy.

Inflation expectations, which had risen last year, are now back down to levels Bullard said is consistent with the Fed's 2% inflation target.

Still, Bullard said, households have about $400 billion more in savings than was usual in the pre-pandemic era, representing what could be kindling for more inflation; and the "zone" that constitutes sufficiently restrictive rates can fluctuate depending on incoming data.

Accordingly, he said, "the prospects for continued disinflation are good but not guaranteed."

Fed Chair Jerome Powell signaled a pause could be the right call as the Fed assesses progress on inflation and the impact of the recent banking sector stress on credit conditions.

Bullard said earlier this month he has an open mind about June, though rates may need to rise further. He did not specifically address the June meeting in his prepared remarks on Friday.

(Reporting by Ann Saphir; editing by Diane Craft)