U.S. economic growth is looking far less robust than the U.S. central bank would like, but bumps in the road are unlikely to derail the recovery, a top Federal Reserve official said on Thursday.
Aggressively stimulative monetary policy and improved access to credit should prevent the economy from falling back into recession, New York Federal Reserve Bank President William Dudley told reporters at the bank's headquarters.
A raft of weaker-than-expected economic data has moved the risk of a so-called double-dip recession to the top of Wall Street's talking points.
The road to recovery is turning out to be a bit bumpy as relatively weak consumer spending and the ongoing problems in financial markets are keeping growth far less robust than we would like, Dudley said.
U.S. economic growth in the third quarter may be a bit less than in the first half of the year, he said.
That said, the recovery appears sustainable, he said.
We think the risk of double dip is quite low. The reason for that is quite straightforward: policy is quite stimulative. It's set on very aggressive easing setting, he said.
In its fight against the deepest recession since the Great Depression, the U.S. central bank cut benchmark interest rates to the bone and pumped billions of dollars into the financial system.
Dudley said lean business inventories and the lessening of credit constraints also point to a sustainable, if modest, economic recovery.
Dudley's remarks come a day after Fed Chairman Ben Bernanke told lawmakers that the U.S. economic outlook is unusually uncertain and that the Fed could ease monetary policy further if necessary.
Dudley focused his remarks on the outlook for manufacturing and the regional economy. He said that improving demand for U.S. exports should continue to drive an expansion in manufacturing output.
He said New York's financial sector employment is also on the mend, though he added that whether it returns to pre-recession levels remains an open question.