Fed's Stern: Would not oppose rate cut if needed

CHICAGO (Reuters) - Minneapolis Federal Reserve President Gary Stern said on Tuesday he would support lowering the federal funds rate again if the economic outlook dictates a cut.

But in an interview with Market News, Stern said there were "institutional issues" with lowering the target rate below the current 1 percent.

Stern is a voting member of the Federal Open Market Committee in 2008, and will deliver his final vote for the year when policy-makers convene on December 16.

Stern said he was "not unalterably opposed" to taking the funds rate below 1 percent, and anticipated that much of the news on the economy in the next few weeks would be negative. He also said he would not prejudge the outcome of the December meeting.

"We've got another month more of evidence that will accumulate, and some of the evidence may be things that do or don't happen in Washington as well," he said.

Stern said that although the inflation threat "clearly has diminished appreciably" in recent months it was "premature" to worry about the prospect of deflation.

(Reporting by Ros Krasny; editing by Gary Crosse)