The U.S. economy is heading in the right direction and will pick up steam over the next two years, but high unemployment and low inflation still paint an unsatisfactory picture, New York Federal Reserve President William Dudley said on Monday.
"The economy is healthier, but it is not yet well," Dudley said in remarks prepared for a press briefing. "In order to reduce joblessness significantly over the coming quarters, the economy needs to grow at a considerably faster rate than we have seen so far in this recovery."
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Dudley said persistently low inflation probably hit a trough in the second half of last year but said it would take time for the jobless rate, currently at 9%, to fall. He also said it could take up to a year to see a "meaningful recovery" in the housing market.
Dudley is considered one of the more dovish members of the Fed's policy-setting committee and as head of the New York Fed has a permanent voting seat on the panel.
While the U.S. unemployment rate fell unexpectedly in January, Dudley said that was not "an unmitigated positive" and partly reflects people leaving the workforce.
But he said the Fed's $600 billion bond-buying program has helped to ease financial strains and stimulate growth. He expects brisker growth this year and in 2012, adding the "risk of a double-dip has subsided."
"Viewed through the lens of the Federal Reserve's dual mandate -- the pursuit of the highest level of employment consistent with price stability -- the current situation remains unsatisfactory," he said. "However, we appear to be heading in the right direction."
The U.S. economy grew at a rate of 2.9 percent in 2010 after contracting the previous year, and most economists expect quicker growth in 2011.
Dudley, who was speaking at a briefing on economic conditions in the New York Federal Reserve district, also noted that the flow of credit to households increased in the final three months of 2010. For the first time in two years, he noted, households increased their non-mortgage debt, albeit slightly, by $7.3 billion in the fourth quarter to $2.31 trillion.
For example, the number of credit card applications increased, indicating a pick-up in consumer demand for credit.Total U.S. consumer indebtedness declined to $11.4 trillion as of December 31, continuing a two-year trend, according to a Fed survey also released on Monday. The number of credit card applications.