The U.S. economy will regain some momentum in the second half of 2011, but the pace of growth will remain "painfully slow" for many and the risks to recovery have increased, a top Federal Reserve official said on Friday.

Though financial conditions have improved and the pace of job creation has quickened in the last year, a recent run of disappointing data suggested the recovery is increasingly at risk, New York Federal Reserve President William Dudley said in a speech to business leaders in Brooklyn, New York.

High food and energy prices and a weak housing market were among the main factors likely to keep consumer budgets tight, he said.

"I anticipate economic growth will pick up enough in the second half of 2011 to sustain a moderate economic recovery," Dudley said. "Still, the pace of recovery will probably be painfully slow for the many unemployed and underemployed workers."

While non-food and non-energy price rises remain modest, he said it is crucial for the Fed to ensure inflation expectations remain in check.

But Dudley said he expects high energy prices to prove temporary, adding that "we still have a considerable way to go to meet the Fed's dual mandate of full employment and price stability."

Financial markets widely expect the U.S. central bank to hold benchmark interest rates near zero until 2012 to help boost an economy still struggling with a high jobless rate.

Earlier this week, Fed Chairman Ben Bernanke said accommodative policies are still needed. "Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established," he said during a speech in Atlanta.

The annualized pace of U.S. growth slowed to 1.8 percent in the first three months of 2011, down from 2.8 percent in the fourth quarter of 2010. Dudley said growth it is likely to remain sluggish in the April-to-June period.

FISCAL CONSOLIDATION

Dudley added that any attempt by Congress to tighten fiscal policy through spending cuts or tax increases would add to the short-term growth risks for the economy.

"I would emphasize, however, that a credible plan for long-term fiscal consolidation is sorely required and would have economic benefits," he said.

Congress and the White House are at odds over how to shrink a gaping U.S. budget deficit and a rising public debt burden. Several ratings agencies have warned that the country needs to address its public finances lest it risk losing its cherished AAA credit rating.

Dudley was in Brooklyn to discuss regional economic developments. He said the borough, one of five that make up New York City, has already added back all the jobs lost during the 2008-2009 downturn. But mortgage delinquency rates were elevated, and overall unemployment remained "unacceptably high."