High unemployment and low inflation warrant “exceptionally low levels of the federal funds rate for an extended period of time,” Federal Reserve Bank of Cleveland president and chief executive officer Sandra Pianalto said yesterday.

However, she noted, much uncertainty exists, so it will be necessary to monitor economic conditions closely.

“For the next couple of years, I expect employment levels to remain well below what I would consider full employment. Similarly, I expect inflation to only gradually drift up from its currently low level but nonetheless remain subdued,” Pianalto told the Economic Club of Pittsburgh, according to a prepared text of her remarks released by the Fed.

“In my view, this outlook warrants exceptionally low levels of the federal funds rate for an extended period of time,” she said.

“That said, there is more uncertainty than usual around my outlook, so it will be critical to monitor incoming information and respond as necessary to promote economic recovery and price stability.”

Pianalto said the recovery will be slow because of prolonged unemployment and extreme caution being shown by both consumers and business owners.

The job losses in this recession, she added, have been “more severe” than typical during a downturn.

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