The U.S. current account deficit is not sustainable but an adjustment need not be disorderly, provided the government and central bank deliver good policies, a top Federal Reserve policy-maker said on Wednesday.

St. Louis Federal Reserve Bank President William Poole, echoing comments by other policy-makers playing down the risks posed by the current account deficit, said he did not expect problems and argued the threat was often exaggerated.

"The question is not whether the U.S. current account deficit will fall in the future but whether the inevitable adjustment is likely to be painful and disruptive of U.S. economic growth and stability - a hard landing," said Poole in a speech to students at Lindenwood University.

"My answer is that a hard landing is very unlikely provided that U.S. monetary and fiscal authorities maintain sound policies. The Federal Reserve needs to pursue policies that yield low inflation and financial stability and the federal government needs to pursue policies that yield fiscal balance in the long run," he said.

"I believe the current account adjustment will be fairly slow and orderly, and that it may not begin for quite some time," Poole added.

The U.S. current account deficit has pushed above 6 percent of gross domestic product and many observers believe this demands a major devaluation of the dollar to reverse course.

In fact, the dollar has gone the other way in recent months and it hit a 2-year high against the euro this week.

Poole, who is not a voting member of the Fed's interest rate setting committee this year, argued the central role played by the dollar as a world reserve currency, and the attractiveness of U.S. assets to foreign investors, help to mitigate the threat.

"Dollar depreciation, should it occur in a hard landing process, will be self-limiting because the dollar value of U.S. assets abroad will rise, thus improving the U.S. net international investment position," he said.

"Market participants, knowing this fact, are therefore unlikely to drive down the foreign currency value of the dollar in a rapid and disruptive fashion."

His argument follows analysis by Ben Bernanke, nominated to be the next Fed chairman, that the current account deficit is a function of a global savings glut.

Although taking a different approach to the issue, Poole's comments are evidence that the U.S. central bank remains relatively calm about the deficit. If he had sounded more alarmed, investors might have wondered if the Fed was thinking of doing something about the current account imbalance.

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