A senior Federal Reserve Board official warned Thursday against becoming complacent about the economy's continued health.

Michael J. Prell, director of research and statistics, told the Charlotte Economics Club that business managers, investors, and consumers may have exaggerated confidence in the central bank's ability to ensure an eternal bull market.

This misguided view could create a new type of "moral hazard," Mr. Prell said. Companies and the public may start ignoring the downside risk to investments on the assumption the economy will never fall into recession, he said.

"If so, there could be greater potential instability in the system than is readily apparent at this time," he said.

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