New York – The U.S. economic recovery is increasingly at risk from factors such as increasing food and energy prices and falling home values, the president of the New York Federal Reserve Bank said Friday.
Though a continued "moderate economic recovery" still seems likely, "the recent disappointing data suggest that downside risks to the outlook have increased," William Dudley told the Brooklyn Chamber of Commerce.
Household expenditures have been "further strained" by the climb in commodity prices, while the return to falling home prices could "dampen consumer spending and housing activity more than I expect," he said.
"I anticipate economic growth will pick up enough in the second half of 2011 to sustain a moderate economic recovery," Dudley said, yet he acknowledged that "the pace of recovery will probably be painfully slow for the many unemployed and underemployed workers."
The New York Fed president also cautioned that moves by Congress to sharply cut federal spending or raise taxes would increase the obstacles to growth in the short term.
"I would emphasize, however, that a credible plan for long-term fiscal consolidation is sorely required and would have economic benefits," Dudley added.
Though noting May's discouraging figures on job creation, he insisted that the labor market is "more solid" than a year ago.
In a speech earlier this week, Federal Reserve Chairman Ben Bernanke said that in light of continuing economic weakness, U.S. interest rates would need to remain low for an "extended period."