Fed's Warsh warns of false optimism on U.S. economy

By Ros Krasny

NEW YORK (Reuters) - A top Federal Reserve official warned on Tuesday not to take recent gains across a range of asset prices as proof the U.S. economy is on the verge of a strong recovery.

"The panic's hasty retreat should not be confused with robust recovery," Federal Reserve Governor Kevin Warsh said in prepared remarks to the Institute of International Bankers annual meeting in New York.

"The rather indiscriminate bounce off the bottom -- across virtually all assets and geographies -- may be more indicative of a one-time reset, which may or may not be complete."

Warsh said private demand, the true arbiter of economic performance, "remains weak" even while government spending has surged, and the the jobless rate is likely to peak at a higher rate, and linger longer at those high rates, than in recent recessions.

"The 'jobless recovery' may prove to be a familiar and vexing refrain," he said.

"I would expect business capital expenditures and consumer spending to continue to disappoint for the next several quarters," Warsh added.

Rising exports will also not provide an easy way for the U.S. economy to return to growth, he said. "The global economy runs the risk of being mired in a period of slower growth for several years to come."

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