Recovery likely this year, says key Fed official

Federal Reserve Vice-Chairman Donald Kohn said the pieces are falling into place for an economic recovery this year and said that while he expects the rebound to be modest, there's a chance it could be stronger than expected. "The cross-currents in the recent data and a bit more favourable financial news of late stand in contrast to the uniformly bleak picture of a few months ago," Kohn said. The developments "may be an early indication" that the economy's contraction is slowing and it will stabilise later this year, he said. Next to Fed Chairman Ben Bernanke, Kohn is the most influential Fed board member. His comments, coming just before next week's Federal Open Market Committee policy meeting, suggests the outlook among Fed officials has improved in recent weeks. Earlier this month, Kohn noted in a speech that "we are not out of the woods yet," a sign of the reluctance of officials then to read too much into a glimmer of improvement. With the outlook still uncertain and the economy burdened by considerable slack, it's far too early for the Fed to begin considering pulling back its rescue programmes for the economy. Still, Kohn's comments suggest Fed policy makers may nod to the improved tone in economic data in the statement they are schedule to issue on April 29 after their next meeting. Kohn noted that consumer spending appears to have steadied and that low mortgage rates and more affordable homes could help the beleaguered housing sector to stabilise. He also noted that excess business inventories are being worked off and that lower oil prices were bolstering household incomes. Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here .