Federal Reserve Bank of Minneapolis president Narayana Kocherlakota lowered his expectations for economic growth Wednesday to near 2.4% in the second half of this year and about 2.5% in 2011.

“Our September estimates are distinctly lower than our August estimates,” Kocherlakota said, according to prepared text of a speech released by the Fed.

The recovery “is more modest than I expected at the beginning of this year,” he said. But, future use of quantitative easing “would have a more muted effect on Treasury term premia. Financial markets are functioning much better in late 2010 than they were in early 2009.

“As a result, the relevant spreads are lower,” he said. “I suspect that it will be somewhat more challenging for the Fed to impact them.”

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