A top Federal Reserve official said on Wednesday she expects the U.S. economy to stabilize this year and begin to recover in 2010.
I expect economic conditions to stabilize by the end of the year and then begin to recover next year as the fiscal stimulus boosts spending and as we work off excess inventories, Cleveland Fed President Sandra Pianalto said in a speech to a bankers' group.
The world's largest economy shrank by 6.3 percent in the last three months of 2008, the worst showing since 1982, and unemployment rose to a 25-year high of 8.1 percent in February. Analysts expect job losses to accelerate in March.
The crisis has spread around the world, with international economic organizations predicting declines in world-wide growth this year.
The U.S. central bank has cut interest rates to near zero and pumped hundreds of billions of dollars into the economy to boost lending since the crisis exploded in the summer of 2007. The U.S. government has put into play a $700 billion bank bailout package and a $787 billion spending and tax cut bill.
Lawmakers and policy makers are also debating ways to strengthen financial system oversight to ensure a similar crisis can be avoided in the future.
Pianalto said the Fed continues to aggressively use all the tools at its disposal to provide liquidity to financial markets and promote an economic recovery.
(Reporting by Jim Leckrone, writing by Mark Felsenthal; Editing by Theodore d'Afflisio)