Fed's Rosengren warns against premature retreat

BOSTON Oct 2 (Reuters) - The U.S. economy remains vulnerable despite signs of stabilization, and the Federal Reserve should resist the temptation to tighten monetary policy too soon, Boston Fed President Eric Rosengren said on Friday.

Improved stock prices for financial firms reflect an increased faith in their ability to withstand lingering credit issues, Rosengren said. Yet he added the economy's actual strength might fall short of what financial markets were expecting.

"The economic recovery remains fragile and quite capable of falling short of the more positive expectations and degrees of confidence now reflected in financial markets," Rosengren told the Greater Boston Chamber Financial Services Forum.

(Reporting by Pedro Nicolaci da Costa, Editing by Chizu Nomiyama)