St. Louis Fed chief Bullard says the Fed should sell assets before it hikes rates and that he would begin asset sales in the second half of this year. He would want to see the Fed’s balance sheet back to normal size before the business cycle turns again.

Bullard is bullish on the economy, forecasting growth above 3% in the first half of 2010 and little chance of a double-dip recession. A spike in inflation expectations could cause the Fed to tighten even if unemployment stays high, he says.