Speaking at an event in New Orleans, Atlanta Fed President Dennis Lockhart (non-voter) said that markets pose a serious threat to the economy.

"Today we're in the midst of very stressed financial markets with the potential of doing serious damage to the broad economy - Main Street in the current jargon - both here in the United States and abroad," said Lockhart.

Lockhart noted that growth prospects have weakened and that the outlook growth for exports has "dampened".

"Overall, the outlook for inflation may have improved, but prospects for growth have weakened," Lockhart said. "Importantly, I believe problems in our financial system add significant risk to the downside for the economy."

Lockhart warned that consumers may have to "tighten their belt" as credit markets at home and abroad are stretched.

By Steve Stecyk and edited by Nancy Girgis
©CEP News Ltd. 2008