Europe's $1 trillion bailout fund might alleviate some of concerns that its debt problems could spread to the US, Philadelphia Fed President Charles Plosser told CNBC Monday.
The Fed also has reopened currency swap lines with Europe and taken other steps to help the EU, he added.
“The Fed’s role in renewing the swap lines was in effort to insure that that didn’t happen,” said Plosser.
Plosser said that his major concern was not inflation but that Europe's debt problems and weakening economy could hurt the US.
"It could weaken our ability to exports goods and services to Europe," he said. "That’s also going to have some effects on our exchanges. But fundamentally, as long as contagion doesn’t occur in the financial markets, then the affect [on the U.S.] should be more modest.”
Plosser also said “we’re not out of the woods yet” on inflation, which he said could occur later on in the economic recovery.
Plosser, who favors keeping the interest rate zero-bound for now, would consider supporting an upward move in the interest rate to the Federal Open Market Committee, if the market indicators justified that action. He thinks the Fed needs to articulate that it would get rid of mortgages and shrink its balance sheet.
Plosser said that he remains upbeat about the U.S. economy. He also said he expects continued job growth.
He said he was concerned about the financial reform bill in two areas. One, he thinks it's important that the Fed not lose control of supervising smaller banks. "The reserve banks, as they exist, are the roots of a federal system where we reach into the community, and not just Wall Street."
He also said he was dubious that the financial reform bill would solve "too big to fail."
"You need a more disciplined rule-based response to firms that get into trouble," he said. "The more discretion government and regulators have to bail out and reallocate money to some creditors and not to others is a recipe for firms to come in and lobby that they're too big to fail and, 'therefore treat us differently.' "
Correction: An earlier version of this story incorrectly stated that Charles Plosser said he expects about 600,000 new jobs to round out the year.