WASHINGTON -- The economy has emerged from its doldrums and may be moving toward a full-fledged expansion, Federal Reverse Board Governor Edward W. Kelley Jr. said Thursday.

He said the Fed's recent monetary easing had effectively stabilized prices and suggested that he was leaning against further easing.

Warning on Inflation

"Inflation is now falling steadily, but its reemergence two or three years down the road must be prevented," Mr. Kelley said in a speech to the Government Bond Club of Houston.

The text was released in Washington.

He added, "It could be counterproductive to ease short rates if that were to trigger market nervousness which forced long rates to rise."

Pessimism Rejected

Mr. Kelley said the prevailing pessimism about the economy was unjustified.

"Our balance sheets are strengthening, our productivity and competitiveness are improving, our financial system is regaining its health, and inflation is coming under control," he said.

"Our economy, in my view, is displaying an amazing resiliency, flexibility and underlying strength."

Resilience Is Noted

Mr. Kelley said the economy was able to withstand a banking crisis that, "had it occurred at an earlier age, would have been sufficient by itself to cause a substantial economic crash."

He predicted that the forthcoming report on third-quarter real gross domestic product would have "almost certainly crossed over into new high ground."

If so, he said, the economy will be in an expansion, rather than merely in recovery.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.