Increased consumer caution following the financial crisis suggests the return to normal levels of economic activity may take longer than after past downturns, Federal Reserve Governor Elizabeth Duke said on Thursday.
"Some of the effects of recent economic turmoil may result in a longer period of economic adjustment than has been the case in past recessions, as fundamental attitudes appear to have shifted," Duke told the Virginia Association of Economists in Richmond, Virginia.
Beyond that remark, Duke did not comment on the outlook for the economy or monetary policy in a speech on a Fed study of consumer finances released earlier in the day.
The survey said losses in household wealth during the crisis caused most families to be more cautious about spending. Even families that managed to post gains during the downturn seemed to be wary, the study found.
Duke said that the study showed that people seemed inclined to curb their risk-taking as much in response to wealth declines for others as to changes in their own financial conditions.
The findings of the study suggest that consumer spending may not be as much of a driver of economic recovery as it has in the past because families are more fearful of losses in their wealth.
Discussing credit and banking, she said that banks that are able to expand their lending to small businesses are in a good situation now, Duke said.
"Small business lending is a place where you can get customers and you can get market share," she said in response to questions after her speech.
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