An official with the U.S. central bank warned Thursday it should be ready to revive a program from the financial crisis if the world's biggest economy appears headed for deflation.

James Bullard, president of the Federal Reserve Bank of St. Louis and a voting member on the Federal Reserve's main policy-setting committee, made the case in comments to reporters and in a paper.

He said the Fed should be ready to resume buying government debt on the bond markets if the country seems headed toward a bout with deflation.

A shopper checks a jacket from a sales rack with a final discount price of 1,900 yen ($22) at a clothing store in Tokyo. Deflation has kept its grip on the world's second biggest economy for almost a year and a half. .(Itsuo Inouye/Associated)

Bullard said the weak economy poses the risk that the United States could tip into a Japanese-like bout of deflation, where economic growth stagnates.

That's a widespread and prolonged drop in prices of goods, values of homes and stocks, and in wages. At its worst, during the Great Depression, deflation led to falling profits and business investment, plant closures and layoffs and trade protectionism.

Still, Bullard said that the deflation risk is low.

The idea behind buying government debt is that it would reduce the money supply, push up prices, energize the economy and nip deflationary forces. Last year, the Federal Reserve bought up to $300 billion US worth of Treasury securities.