The economic recovery could be “painfully slow, and the economy will remain unusually vulnerable to new shocks,” according to Federal Reserve Board governor Daniel K. Tarullo.

“As has been widely observed in recent weeks, there are signs that the rapid decline in economic activity of the past few quarters is slowing,” Tarullo told the Peterson Institute for International Economics yesterday, according to prepared text released by the Fed.

“The latest data give some reason to hope that we are approaching a bottom in economic activity and that growth will resume later this year. Yet stabilization or improvement would begin from very low levels compared with those that prevailed in recent years. Recovery may be painfully slow, and the economy will remain unusually vulnerable to new shocks. The news remains bad in two areas of direct importance to American families: Unemployment continues to rise and housing prices continue to decline.”

Strain remains in the financial markets, he said, which is “why many observers predict only a gentle slope on the upward side of the recession curve.” As such, the need for government-provided liquidity and guarantees remains. “Because the collapse of these same markets set off the present crisis and the serious recession that has followed, the case for far-reaching reform appears a strong one,” Tarullo said.

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