(Adds comments, background on Williams, Yellen)
CHICAGO, July 28 (Reuters) - A recent spate of weak U.S. economic data signals a slower recovery than earlier expected, but does not portend a double-dip recession, San Francisco Federal Reserve Bank’s top economist said on Wednesday.
With short-term interest rates near zero since December 2008, the Fed’s monetary policy remains “highly supportive” of the recovery, the regional bank’s top researcher said in the text of speech to a group of community leaders in Portland, Oregon.
“Although discouraging, the recent softness in the economic data looks much more like a bump in the road of what we already thought would be a gradual recovery, rather than a swerve into the ditch,” John Williams wrote.
“The economy is still on a recovery path, with moderate growth, and ... inflation will remain very low,” he wrote.
Williams delivered the economic policy speech in lieu of San Francisco Fed President Janet Yellen, who had agreed to the appearance before her nomination as vice-chairman of the Washington-based Federal Reserve Board.
The U.S. Senate Banking Committee earlier on Wednesday approved the nomination of three new members to the Fed Board, including Yellen, clearing the way for a vote by the full Senate.
Williams is considered to be a candidate to succeed Yellen, although the San Francisco Fed has declined to say much on the search except to confirm that it has begun.
Despite recent drops in both housing and retail sales, as well as consumer confidence, the recovery remains “several notches” above a double-dip recession, he said. It will likely take a considerable period before consumers and businesses regain confidence and trust and resume spending and hiring.
Unemployment will likely fall only to 8.5 percent by the end of next year, and it will take years before reaching more normal levels, he said.
William said public expectations the Fed will “do what it takes” are keeping both inflation and deflation in check.
He said he expects inflation to stay near 1 percent before reaching about 2 percent upon full recovery, and does not expect deflation.
“But we face significant risks to this outlook and need to remain vigilant,” he said.