WASHINGTON (MarketWatch) -- Economic growth in 2007 will be moderate but sustainable, and inflation will be lower than it was in 2006, said Fed vice chair Donald Kohn on Monday.
"The economy appears to be weathering the downturn in housing with limited collateral effects and inflation appears to be easing with the aid of lower energy prices, well-anchored inflation expectations, and competitive labor and product markets," Kohn said in a speech prepared for delivery to the Atlanta Rotary Club.
But Kohn stressed it was too early for the Fed to lower its guard against inflation. His expectation of a very gradual decline in inflation was "by no means assured."
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