The Federal Reserve is likely to pause before making any changes to monetary policy when its bond-buying program ends in June, but a stronger economy and rising inflation could lead the central bank to start tightening credit by the end of 2011, a Fed official said Friday.

In an interview, Federal Reserve Bank of St. Louis President James Bullard said it was “reasonable” to expect the central bank would slowly begin to unwind its easy-money policies before the end of the year.

The first step is likely to be allowing the Fed’s huge balance sheet to gradually shrink by no longer reinvesting the cash it receives when its mortgage and possibly also its Treasury bond holdings mature.

“We do have rising inflation and rising inflation expectations making me a little bit nervous,” Bullard said. “We’ve got to start taking some steps to start to tighten monetary policy as we continue on through 2011 to make sure we don’t allow inflation to get away from us.” …