Fed's Dudley: US economic growth likely in H2 2009

NEW YORK, July 29 (Reuters) - The U.S. economy will likely see moderate growth in the second half of 2009, but the recovery will be considerably slower than usual, the president of the Federal Reserve Bank of New York said on Wednesday.

A modest recovery in housing activity and car sales, the impact of the fiscal stimulus and a sharp swing in the pace of inventory investment should give the economy a boost, William Dudley said in remarks prepared for delivery to the Association for a Better New York.

However, the pace of recovery will likely be "considerably slower" than usual, he said.

"The balance of risks are still tilted toward weakness in growth and employment and not toward higher inflation," said Dudley, a voting member of the U.S. central bank's policy-setting Federal Open Market Committee.

Consumption is likely to grow slowly, households are still adjusting to the sharp drop in their net worth and the business fixed investment in structures sector is likely to be a significant drag on the economy over the next year, he said.

Not least, financial firms are still working their way through large credit losses, he said.

"This means that credit availability will be constrained for some time to come and this will serve to limit the pace of the recovery," he said.

For this reason, he said, it is "very premature" to talk about when the Federal Reserve will exit its current accommodative policies.

"If the recovery does, in fact, turn out to be lackluster, the unemployment rate is likely to remain elevated and capacity utilization rates unusually low for some time to come," he said.

"This suggests that inflation will be quiescent."

(Reporting by Kristina Cooke, Editing by Chizu Nomiyama)