Fed's McDonough: U.S. Slump at or Near Bottom

FRANKFURT – New York Federal Reserve President William McDonough said on Tuesday the U.S. economic downturn was at or near the bottom, though still showing mixed signals.

"The economy is giving signals that the economy is at or near the bottom," McDonough told reporters after a speech on banking regulation. "Thus far the American recession...is an unusual recession in that it does not seem to be very deep."

However, economic data were mixed, McDonough added.

"There are data saying that the economy is starting to recover and there are data saying that it tends to be weak."

He also said the current recession was unusual in that consumer confidence and spending remained stronger than they usually tended to be in a recession.

"Business fixed investment has tended to be the weak part of the economy," McDonough said.

Fed officials have been sounding cautiously optimistic recently on the U.S. economy, which entered a recession in March last year. They have said a recovery could well be under way.

Earlier on Tuesday, Federal Reserve Bank of Philadelphia President Anthony Santomero said he expected a recovery of the U.S. economy in mid-2002, but policymakers had to be flexible since roadblocks could hamper any rebound.

"We can all be confident recovery is on the way. One reason for such confidence is our country has the biggest stimulus and lowest interest rates we have had for a very long time," Santomero said in a speech in Philadelphia.

Federal Reserve Bank of Atlanta President Jack Guynn said on Monday there were hints the economy might be stabilizing, but said it was too early to declare that the economy had officially turned the corner.

Recent data have shown unexpectedly strong improvement in consumer confidence and improving activity in both the manufacturing and services sectors, boosting hopes for a quick rebound in the economy.

The Fed carried out one of its most aggressive rate-cutting campaigns in history last year, slashing overnight borrowing costs to a 40-year low of 1.75 percent as it sought to combat a recession that started in March.