Bullard says gap between Fed forecasts and action is eroding credibility

The Fed's "dot plot" of projected interest rate policy "appears to be too steep. Fed Funds futures markets do not seem to believe it. They are priced for a much shallower pace of increases," Bullard said, arguing that the central bank may need to only increase rates once between now and the end of 2018.

"The Fed's actual pace of rate increases has been much slower than what was mapped out by the committee in the past. This mismatch between what we are saying and what we are doing is arguably causing distortions in global financial markets, causing unnecessary confusion over future Fed policy, and eroding credibility of the (Federal Open Market Committee)."

(Reporting by Howard Schneider; Editing by Meredith Mazzilli)