The independence of the Federal Reserve is essential for credible monetary policy and doubts about the U.S. central bank's ability to do its job without political interference could hurt the nascent economic recovery, a senior Federal Reserve official said on Sunday.

Talk of eroding the Fed's independence can be counterproductive for economic recovery, St. Louis Federal Reserve Bank President James Bullard said in slides prepared for a panel in New York.

Bullard said that non-independent central banks have historically been forced to finance large government budget deficits. This can be very inflationary, he added.

Last week, a U.S. congressional panel approved a measure to open the Fed's monetary policy decisions to government audits, a surprise blow to the central bank's efforts to shield its independence and a signal of frustration with the central bank.

The amendment was a further congressional slap at the U.S. central bank after a Senate regulatory overhaul proposed stripping the central bank of its regulatory authority.

Some lawmakers fault the Fed for failing to anticipate or prevent the financial crisis that pitched the economy into a deep recession.

Bullard batted back criticism that the Fed missed the brewing crisis saying the central bank provided important warnings before the crisis began.

He noted that his predecessor at the St. Louis Fed, William Poole, argued in the early 2000s that Fannie Mae and Freddie Mac were ticking time bombs, while former Federal Reserve Bank of Minneapolis President Gary Stern published a book entitled Too Big To Fail, warning some financial firms were growing too large for proper supervision.

These types of warnings show that the Fed is well aware of systemic risk concerns in real time, Bullard said in his slides.

Bullard also argued the Fed needs a role in regulating institutions to whom it may lend if required to as the lender of last resort.

He also said that to do its job of setting monetary policy effectively the Fed needs to know the conditions of the financial system.