The U.S. economy is likely to remain very weak for a while, meaning policy-makers will need to stand ready to take further unprecedented actions as needed, Federal Reserve Vice Chairman Donald Kohn said on Friday.
"Conditions are not conducive to a substantial and sustained economic rebound, and the Fed will continue to be alert to ways that monetary policy can contribute to economic recovery," Kohn said in remarks prepared for a speech on the economic crisis.
The Fed's efforts have been "somewhat successful" in reversing tight financial market conditions but credit markets are not out of the woods, Kohn said.
"I expect that lower leverage and tighter lending standards and terms will be enduring features of the financial landscape. But current credit conditions are far tighter than these adjustments would seem to justify," he said.
Kohn said that the Fed's commitment to keeping short-term interest rates low for an extended period has helped lower longer-term rates as well.
"Because it is these longer-term rates that have the largest effects on spending behavior, this sort of communication can be very useful in stimulating borrowing and spending by businesses and households," he said.
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