Economy mending,weakness persists: Fed

Cleveland Fed President Sandra Pianalto said she expects a gradual and bumpy recovery from the recession and is not worried that the Fed’s extensive efforts to pump money into the economy risk igniting inflation.

“I believe there is enough slack in the economy to keep inflation subdued for some time. In this environment,I believe that maintaining the current accommodative policy stance helps to foster both the continued recovery of our weakened economy and the stabilization of inflation rates at levels consistent with price stability,” she told a conference sponsored by Market News International.

Both Pianalto and Dennis Lockhart,president of the Atlanta Federal Reserve,said they expected already-high unemployment rates to continue to climb.

The Fed at its policy-setting meeting last week moved toward phasing out some of its massive support for the economy,but pledged to keep interest rates exceptionally low for an extended period to support the fragile recovery.

In Washington,the debate continued over how to reform financial regulation in order to prevent the occurrence of another financial crisis in the future; some have faulted the Fed,saying it should have been more aggressive in spotting or preventing the deep crisis of the last year.

Fed Chairman Ben Bernanke gave his clearest endorsement yet on Thursday of giving authority to a council of regulators headed by the Treasury Department to oversee the health of the broad financial system.