Volker Sees Economic Growth Later This Year

Beijing, China, June 12, 2009--The U.S. economy could begin to grow again this year, but a strong recovery is unlikely, said President Barack Obama's top adviser Paul Volcker.

"An expectation of some growth late this year and next in the United States seems reasonable," Volcker, a former Federal Reserve chairman who leads a panel advising Obama on economic recovery, said in a speech Thursday at a conference of global bankers in the Great Hall of the People.

However, "a really strong recovery, typical of most recessions, seems unlikely," he said. "Rather, it is going to be a long slog, with continuing high levels of unemployment."

The slump also is easing "most clearly" in Britain, trailed by other European economies, with less evidence of recovery in Japan, Volcker said. He said a "healing process" seems to be under way in financial markets.

Volcker cautioned that U.S. growth depends on stimulus spending and "years of deficit spending far beyond past peacetime experience lie ahead." However, he said inflationary pressures were unlikely for some time to come. That could allow greater leeway to combat the downturn by expanding the money supply.

The legendary Volcker, 81, served as Fed chairman in 1979-87, when he tamed raging inflation, though at the cost of painful interest rate hikes that triggered a recession.