The Federal Reserve will watch the U.S. economy's progress through autumn and into 2011 as it decides how long it will hold interest rates at ultra-low levels, a top Fed official said on Tuesday.

In an interview with Reuters Insider television in London, St. Louis Federal Reserve Bank President James Bullard also said the U.S. economic recovery was on track and that the Fed was keeping a close eye on risks stemming from the euro debt crisis.

He said the Fed could not make any promises on when it would change its monetary policy stance. In the latest Reuters poll, 10 out of 17 primary dealers see the first Fed rate hike coming in 2011.

The economy is doing fairly well so far, Bullard said.

We have some risk, we have the situation in Europe we're watching very closely, but we'll see how things proceed through the fall and into 2011.

He said modest take-up of new dollar liquidity lines suggested there was less stress in the banking system than after the collapse of Lehman Brothers in September 2008.

Bullard said the Fed was mindful of future risks the euro debt crisis may have on the U.S. economy.

There is some risk that the European crisis will morph into something larger, he said.

But he added: As of today, because of bank guarantees, I can't really see it going through into the global banking system.

As the euro zone grapples with fiscal problems in Greece and other countries, Bullard said some form of sovereign debt restructuring in the 16-member bloc would not be disastrous.

If there is some restructuring some day, it's not really the end of the world. It can be done, he said. It's very painful for the country ... and it can incite a lot of volatility in the markets, but it's not the end of the world by itself.

(Reporting by Nick Edwards, editing by Mike Peacock)

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