By Howard Schneider

FORT SMITH, Ark. (Reuters) - Federal Reserve rate cuts are "a possibility" if the coronavirus outbreak intensifies into a global pandemic, St. Louis Fed president James Bullard said Friday, while adding that market pricing for a rate cut will not force the central bank's hand.

In the most explicit assessment yet from a U.S. central banker of how the epidemic is influencing thinking, Bullard said the expectation was for at most a small hit to U.S. growth, containment of the virus, and no need for the Fed to add more rate reductions to the three "insurance" cuts made last year.

In extensive remarks he acknowledged the "serious" downside risks if the virus does remain uncontained and death rates began approaching those of yearly flu outbreaks. But as a base case he pushed back against speculation the Fed might make emergency rate cuts before its March 17-18 meeting or that global central banks might coordinate a joint response. The dramatic market sell-off, he suggested, had gotten ahead of the likelihood the virus will be contained.

"We already lowered rates last year and that was billed as insurance against possible shocks and lo and behold we have a shock. We already took out the insurance,” Bullard told the Fort Smith Regional Chamber of Commerce.

Asked whether strong market expectations of a rate reduction as soon at the Fed's March 17-18 meeting would force the Fed to act, Bullard said: "No I don't."

Separately, Dallas Federal Reserve president Robert Kaplan said he will decide soon whether he thinks a rate cut is warranted. With the Fed's target policy rate currently set in a range of 1.5% to 1.75%, further reductions would push the central bank closer to the zero level it hit during the 2007 to 2009 crisis -- something policymakers would prefer to avoid.

With U.S. stocks crashing 15% in seven trading sessions, however, investors have cast aside all doubt the Fed will step in with rate cuts in just over two weeks' time. The question reflected in interest rate futures markets now is not whether a rate cut is coming on March 18, but how big it will be.

According to the CME's FedWatch Tool, it is a toss up between whether the Fed will cut a quarter percentage point or a half point. A week ago, rate futures reflected a nearly 90% probability the Fed would stick to its previous guidance and leave rates where they are absent a "material reassessment" of the economic outlook.

Some important indicators have slipped, mostly notably market expectations for inflation that have nosedived alongside equity markets.