Federal Reserve member James Bullard told CNBC that traders should not be waiting for an "inevitable recession" and spoke of a solid outlook for the U.S. economy. "We should always plan for the worse and hope for the best. I think the idea that you're inevitably going to have a recession just because you've had an expansion for a while is not really right," Bullard told CNBC's "Squawk Box Europe." "The U.S. expansion, the growth rate has been very slow since the financial crisis ... The level of output is actually quite a bit below where it would be if you had a more normal expansion so that kinda argues for the idea that maybe the expansion can go on for a while longer." The latest growth rate numbers out of the U.S. pointed to an economic expansion of 4.1 percent in the second quarter of the year — the highest in nearly four years. At the start of May, data showed that the U.S. economy had entered its second-longest economic expansion on record, but also the slowest in the post-war period.

Bullard mentioned Australia as an example of a country where the economic expansion has lasted for a "very long time," "25 years or more." However, Bullard, who is not currently a voting member of the central bank, noted that U.S. businesses are "very worried" about trade frictions with other countries. "The companies I talk to ... are very concerned about the trade situation and it's certainly top of (the) mind for everybody. But at the same time their businesses are doing very well, so there's a bit of a conflict between whether they think they should go ahead and invest or whether they should wait and see how the trade situation evolves."

Yield curve

Despite Bullard's optimism, many analysts believe that a growing fiscal deficit, trade wars and rising interest rates could put an end to the economic expansion seen in the U.S. Some also believe that the current yield curve in the bond market is real evidence that a recession is under way. The yield curve — a line that plots short and long-term interest rates — has flattened over the last month. Analysts at UBS Asset Management have even predicted that the curve will invert next year. This is generally interpreted as a sign that economic turmoil is just around the corner. Bullard told CNBC Monday that he is indeed "worried" about the pace of future rate hikes. "I have been worried that we don't overdo normalization," he said. The U.S. Federal Reserve has been lifting rates in an attempt to normalize monetary policy. However, if the Fed announces several rates hikes in a short period of time, that could affect this curve and potentially support an inversion. "I think the yield curve issue is one that is sending a signal to us about, well, maybe the whole structure of rates is just lower today, maybe we should just react to data and not plan to try to get rates up to such a high level that they match what we've seen in the 2000s or the 1990s."

James Bullard, president and chief executive officer at the Federal Reserve Bank of St. Louis. Joshua Roberts | Bloomberg | Getty Images