MADISON, Wis. - Paying down debt and increasing employment are crucial to speeding the economic recovery, three Federal Reserve bank presidents said.

The issue of recovery "comes down to debt" said Edward Boehne, president of the Federal Reserve Bank of Philadelphia, who stressed that corporate and consumer balance sheets were heading toward health.

Mr. Boehne was joined by Silas Keehn, president of the Chicago Fed, and Gary Stem, president of the Minneapolis Fed, at a panel discussion sponsored by the graduate school of banking at the University of Wisconsin.

|Going to Take a While'

Acknowledging that the recovery was uneven and slow, the panel said a full recovery would take time but the panel members would not specify when the recovery might pick up steam.

"We are working through it. Certainly it is going to take a while," said Mr. Boehne.

Mr. Stern was sanguine about the recovery so far. "The underlying fundamental economy is very healthy." Mr. Stem also said it was "significant" that the core rate of inflation had dipped and predicted that it would go lower still.

Job Growth Called Key

Chicago Fed President Keehn said the key to recovery was job growth."

I think we've got to have four or five months of really good employment growth" and about 200,000 new jobs created before a recovery can be sustained, he said.

Mr. Jones said an increase in payroll was important for maintaining a recovery. He predicted that 1994 was the earliest the economy could expand unfettered from debt problems.

The panel said there is lingering caution on the part of both lenders and consumers about expanding debt.

Lending Pullback Seen

Mr. Keehn said that while there is ample liquidity in the banking system, there is "something of a contraction in the extension of credit by commercial banks."

Capital ratios, however, are "looking pretty good," Mr. Keehn said. He added that he thought worries in the business community about inflation are behind the country.

Mr. Boehne agreed, saying the country has by and large gone beyond "the inflationary biases of the last decade."

In response to a question, Mr. Keehn said he wasn't convinced that there was enough "underlying momentum" to provide a sustained recovery.

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