Federal Reserve Bank of St. Louis President James Bullard saidhe thought the U.K.'s vote to leave the European Unionwouldn't have a lasting effect on the U.S. economy, joiningCleveland Fed chief Loretta Mester in playing down the threatBrexit poses to the U.S.

“Now that the markets have had some chance to digest the move, Ithink the ultimate impact on the U.S. economy will be close tozero,” Bullard told reporters Tuesday following a speech in St.Louis.

Mester, who like Bullard is a voter this year on thepolicy-setting Federal Open Market Committee, earlier toldreporters in Sydney that due to the relatively closed nature of theU.S. in terms of its reliance on exports “I don't expect it to be abig effect on our economy.” Officials will keep Brexit in sight asthey weigh the U.S. outlook, she said.

Fed officials are expected to review the implications of theU.K. decision when they next meet on July 26-27, together with datathat showed a sharp rebound in U.S. payrolls last month after adisappointing performance in May.

Investors see only a 4 percent probability of a rate increase inJuly, according to pricing in federal funds futures contracts. Oddsof a move by December are back to 34 percent after falling toaround 8 percent after of the U.K.'s June 23 referendum.

Bullard said the “shock” of the Brexit vote explains why yieldson U.S. Treasuries had fallen to historic lows in theaftermath.

“Wall Street has taken that as a signal that growth is slowing”in the U.S., he said. “I think it's a flight to safety. Iwould not take it as a signal of U.S. growth prospects.”

In his speech, Bullard repeated the argument he unveiled June 17that the U.S. is stuck in a low-growth environment for the next twoto three years and that Fed officials should keep the federal fundsrate almost unchanged for that period.

Fed officials held their target range for the benchmark federalfunds rate at 0.25 percent to 0.5 percent at their June 14-15meeting to wait for more information on the health of the U.S.labor market and to assess the fallout from the British vote.

Answering reporters' questions, Bullard said the robust Juneemployment report of 287,000 workers added to payrolls showed thatMay's poor performance of only 11,000 new jobs had been “ananomaly.” The three-month average for employment growth signals thetrend is slowing as expected, he said.

Payroll Slowdown

“I would expect continued slowing in the pace of job growth,” hesaid. “We can't add 200,000 jobs a month anymore.”

However, the St. Louis Fed chief said he doesn't expect atightening labor market to trigger significantly higher inflationbecause GDP growth will likely remain too weak, at around 2percent.

“If there was rapid job growth that seemed to be associated withvery high economic growth, in that situation we might have toadjust a little bit,” he said.

Asked if there was a greater role for fiscal policy to play inboosting the longer-term U.S. outlook, Bullard said the nation isonly likely to achieve faster growth if other parts of thegovernment respond with policies that address tepid productivitygrowth and demographic trends.

“We badly need a growth agenda,” Bullard said, adding that thecentral bank had repeatedly made this argument. “We're talking, butI think it's falling on deaf ears.”

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