The U.S. economy is shrinking at a "dramatic rate" and prospects for a recovery in the second half of 2009 have downside risks, Atlanta Fed President Dennis Lockhart said at an event in Tampa, Florida on Tuesday.
The U.S. financial system is "certainly not out of the woods", Lockhart said, adding that upcoming stress testing of the 19 largest banks in the United States will reveal more information about the stability of financial entities.
Nevertheless, the banking system remains highly distressed and the U.S. government is likely to invest further in its banking system, he said.
Lockhart is a voting member on the Federal Open Market Committee.
By Erik Kevin Franco and edited by Stephen Huebl
©CEP News Ltd. 2009