Speaking at a National conference on Public Retirement in Louisiana, Federal Reserve Vice Chairman Donald L. Kohn reiterated his position that while the economy is currently experiencing intense pressures, he fully expected that it would recover in the second half of 2008.

He maintained the Federal Reserve's position that inflation would ease and commodity prices would fall in 2009. He stated that the Federal Reserve would continue to carefully monitor the economic situation.

"The Federal Open Market Committee will be monitoring inflation developments closely for any sign that our longer-run objective of promoting price stability is threatened. At the same time, we also need to continue to carefully assess whether, after a period of near-term softness in economic activity, the economy is likely to be on-track for sustained economic expansion over time" said Kohn.

Despite the current tightening of credit markets and the uncertain performance of the U.S. economy, Kohn said that monetary policy would evolve with the economy and that it would strengthen in 2009.

"With the information now in hand, it is my judgment that monetary policy appears to be appropriately calibrated for now to promote both rising employment and moderating inflation over the medium term. But a large measure of uncertainty surrounds that judgment and as the economy evolves so will the appropriate stance of policy," said Kohn.

Kohn stated the business spending for equipment software was a positive note in the first quarter, despite stricter lending practices.

By Steve Stecyk and edited by Cristina Markham