The IMF has increased the probability of deflation in Europe. What should the U.S. do about it?

The Federal Reserve should address concerns of slowing inflation through the timing of its first hike of interest rates, Boston Fed President Eric S. Rosengren said in an interview Thursday.

Wall Street has been be on a wild ride in recent days, driven in part by growing fears of deflation in Europe. But Rosengren said the underlying trends in the U.S. economy have not changed appreciably. And investor sentiment could shift again before the Fed holds its next policy-setting meeting in Washington at the end of the month.

“At this point, there’s been a lot of financial market turbulence, but the economic data we’ve gotten to date has not indicated much of a deviation from 3 percent growth at the end of the year,” Rosengren said. “If that turbulence starts to reflect underlying trends … then we’ll definitely have to think about that.”

Rosengren said the Fed is committed to meeting its long-run target of 2 percent inflation. Annual price gains have been running below that goal since the recession despite the central bank’s massive stimulus efforts.

The Fed is expected to end one part of that program this month. Officials have indicated that they will stop purchasing long-term bonds -- essentially pumping money into the economy -- after October. But one top central bank official, St. Louis Fed President James Bullard, said Thursday that he would consider delaying to counteract deflationary fears. The Fed bought $85 billion a month in long-term Treasuries and mortgage-backed securities in 2013, a process known as quantitative easing, and has been tapering that amount throughout this year.

“Delaying the taper is something we could do right now that could buy us a little time. It would just keep some optionality for the future,” Bullard said in an interview Thursday. “It would send a signal that we’re willing to defend our inflation target.”

Still, Bullard said he believes that the central bank should its target for short-term interest rates in March -- an earlier date than most officials have suggested.

Short-term interest rates have been at zero since the darkest days of the financial crisis in 2008, and investors generally do not expected to the Fed will increase its target until roughly the middle of next year. Bullard said his call for a March rate hike still stands because his forecasts for growth and employment next year have not changed.

Rosengren said he will consider all options at the Fed’s meeting this month but that the debate over deflation was a larger factor in determining when to raise interest rates rather than ending quantitative easing.

“Markets can flip pretty quickly. We probably don’t want to flip monetary policy as quickly as markets flip. But we do want to figure out those underlying trends,” he said. “The market turbulence might have more bearing on when liftoff would occur.”