NY Fed's Cumming: U.S. recovery likely to be sluggish

NEW YORK (Reuters) - Recent data has suggested the U.S. recession may be coming to an end but the recovery will likely be sluggish and risks remain, a senior Federal Reserve official said on Tuesday.

"It appears that we are at the bottom of the recession, but it seems it won't be the easiest and snappiest recovery ahead of us," Christine Cumming, first vice president of the Federal Reserve Bank of New York, said in a lecture at Eastern Connecticut State University.

Cumming, the New York Fed's number 2 official, said the U.S. recession -- which began in December 2007 -- has been the deepest and will likely be the longest since World War II.

"We view the risks as still very much skewed to the downside, in other words a lot could still go wrong and we have to be careful," Cumming said.

Cumming said inflation expectations are well anchored. However, "substantial slack" in the U.S. economy is putting pressure on prices, she said.

"The forces that are at work in the economy right now and around the world are forces that are pushing down prices because there is so much weakness in demand," she said.

On Tuesday, Standard & Poor's said U.S. single-family home prices rose in July from the previous month, surpassing forecasts and bolstering the case of housing market stability after a three-year plunge.

But Cumming sounded a note of caution on housing. "We may not be totally out of the woods yet. There is no question that stabilization of the housing market is a crucial element of recovery ... but at the same time we still have a lot of distress in the housing market to work through," she said.

Cumming also said U.S. consumers are likely to remain cautious.

"Consumption has been really weak, and one of the reasons why consumption probably has been and will be weak is households have decided that they need to boost their savings rate," she said.

(Reporting by Kristina Cooke and Pedro Nicolaci da Costa; Editing by James Dalgleish)