Fed policy-maker warns U.S. near recession

By Burton Frierson

CHATTANOOGA, Tenn (Reuters) - The U.S. economy could be slipping into recession and the Federal Reserve must cushion the pain, a top Fed policy-maker said on Thursday in remarks supporting hopes for more interest rate cuts.

Dennis Lockhart, president of the Atlanta Fed, was one of a number of central bankers on the luncheon speaking circuit hours after government data confirmed anemic growth in the fourth quarter, which analysts say has since slowed further.

"It's clear the economy is in a slowdown that resembles past periods that were the leading edge of a recession," Lockhart told a Rotary Club meeting. "I believe that an important policy objective at this juncture is to ensure that this slowdown is short and shallow."

The Fed last week slashed benchmark lending rates by a hefty three-quarters of a percentage point to a three-year low of 2.25 percent, in addition to the other measures it has introduced to keep money flowing in markets. Investors think it will trim rates by another 50 basis points at its next scheduled policy meeting, on April 29-30.

Meanwhile, Cleveland Fed Bank President Sandra Pianalto said a mortgage crisis that is pulling down housing prices is casting a pall over consumer spending and is "very detrimental to our economy."

Much of her address in Dayton, Ohio, dealt with the Fed's effort to put new policies in place to try to mitigate the damage from the ongoing credit crisis to a vulnerable economy.

Pianalto is a voting member of U.S. central bank's policy-setting Federal Open Market committee this year, but Lockhart is not. The Fed's regional bank presidents get voting slots on a rotating basis.

Gary Stern, president of the Minneapolis Fed and a voting member this year, also voiced concern over slow growth.