WASHINGTON, Jan 8: The US economy is cooling to a modest but more sustainable pace of growth, and does not appear to be going into a downturn, Federal Reserve vice chairman Donald Kohn said on Monday.

In a speech to the Atlanta Rotary Club, Kohn said he believes the weakness in the economy has been largely confined to the housing and automobile sectors.

“The economy appears to be weathering the downturn in housing with limited collateral effects, and inflation appears to be easing with the aid of lower energy prices, well-anchored inflation expectations, and competitive labour and product markets,” Kohn said in remarks released by the Fed.

But he also said inflation remains a potential risk for the economy that could prevent the Fed from cutting interest rates.

The weakness in some economic data “is not the leading edge of general economic weakness but instead an adjustment to a sustained pace of expansion that, necessarily, is less rapid than that from mid-2003 to mid-2006,” Kohn said.—AFP