A top Federal Reserve official said on Monday the economy should do well in 2011 and that oil prices rising on tensions in the Middle East are not currently a drag on the recovery.

We're in very good shape for 2011, the only wild card now is the Middle East. St. Louis Federal Reserve President James Bullard said on CNBC.

Bullard, who is a not a voting member on the Fed's policy setting panel this year, is viewed as a centrist on the spectrum of supporters or opponents of aggressive Fed actions to boost the economy.

He was optimistic about U.S. prospects, saying that even the debt problems that some states and municipalities face were not as severe as issues that some European nations faced.

The economy in 2011 will help out in this situation, Bullard said. As a macroeconomist ... what I'm mainly concerned about is some kind of big problem that might look like the European sovereign debt problem, and I do not think that we're looking at that.

Bullard repeated comments he made last week that he would like to dial back the Fed's $600 billion bond buying program. The Fed promised in November to buy longer-dated Treasury assets until the middle of this year to provide help for the struggling recovery.

However, Bullard would not rule out further use of the Fed's unorthodox long-term bond buying tool, which the central bank put to use after it had already exhausted its conventional strategy by dropping short-term rates to near zero.

If the economy slows down, things don't look very good, sure, you can do more if you need to, he said.

In response to questions, Bullard said that he wants to see the private sector play a larger role in providing housing finance and see the role of government-sponsored enterprises like Fannie Mae and Freddie Mac dialed back.

It should be able to be phased in without disrupting access to mortgage loans but it won't happen overnight, he added.

I would think in terms of a horizon of five to seven years, Bullard said.

(Additional reporting by Glenn Somerville, Editing by Chizu Nomiyama)