INDIANAPOLIS, Dec 7 (Reuters) - St. Louis Federal Reserve bank president James Bullard on Friday repeated his call for the Fed to pause its current cycle of interest rate increases, saying the central bank may already be restricting the economy.

"The current level of the policy rate is about right," Bullard said in a prepared presentation to the Indiana Banker's Association, noting that market-based measures of expected inflation have recently dropped, and that by his calculations the current policy rate set by the Fed is already at a slightly restrictive level.

Bullard estimated that the so-called neutral rate of interest is just around 2 percent. The Fed's current policy rate is between 2 and 2.25 percent.

In addition, low unemployment, at 3.7 percent, is not likely to generate inflation pressure in a world where "there is very little feedback at all" between labor markets and inflation.

Indeed, he argued, information from inflation-adjusted securities markets show investors do not expect the Fed to make its 2 percent inflation target over time.

"Financial markets do not expect the Fed to attain its stated inflation target," Bullard said.

Bullard has made similar arguments before, but his position may take on more resonance when he joins the Fed's rate-setting committee next year and be in a position to dissent. (Reporting by Howard Schneider Editing by Chizu Nomiyama)