St. Louis Federal Reserve Bank President James Bullard cautioned against further rate hikes and said rates may have already hit a "neutral" level that does not stimulate the economy.

In a May 11 speech at the Springfield, Mo., Chamber of Commerce, Bullard said the current target range of the federal funds rate — between 150 and 175 basis points — has no upward or downward pressure on inflation. This, he said, suggests there is no reason to hike rates further.

Bullard, who is a nonvoting member of the Federal Open Market Committee this year, also said that the flattening yield curve should discourage rate normalization. The spread between the 10-year and one-year Treasury yields has decreased from nearly 300 basis points in 2014 to just 72 basis points as of May 2, according to the Fed bank president. An inverted yield curve has historically signaled slower economic activity or even a recession.

Bullard also cited other dovish indicators, including the labor market being in equilibrium and the low-level of business investment in the U.S. economy, against raising rates further.