[E]vidence is mounting that the worst of the economic downturn is behind us...Overall, the U.S. economy is improving but still fragile. Stabilization has taken hold, and the beginning stages of recovery are under way.

After contracting sharply over the past year, economic activity appears to be leveling out, both in the United States and abroad, and the prospects for a return to growth in the near term appear good...[T]he economic recovery is likely to be relatively slow at first, with unemployment declining only gradually from high levels.

[T]he balance of risks is still tilted toward weakness in growth and employment and not toward higher inflation... the economic contraction appears to be waning and it seems likely that we will see moderate growth in the second half of the year.

[A]s we glimpse the first solid signs since the recession started more than a year and a half ago that economic growth may be poised to resume. Indeed, I expect that to happen sometime this year. ... [R]ecovery is likely to be painfully slow. History teaches that it often takes a long while to recover from downturns caused by financial crises.

[M]y advice is to hope for the best and plan for the worst. That means anticipating a range of bad and worst-case scenarios that reflect local economic conditions and a bank’s particular risk profile.

Current economic conditions are mixed at best, but the economy appears to be in stabilization mode. Stabilization necessarily precedes recovery. A recovery has not yet taken hold but should begin before too long.
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Data on the overall economy suggest the same trend of slowing decline. I, along with my team in Atlanta, believe real gross domestic product (GDP) fell slightly in the second quarter. This performance represents substantial progress coming off a contraction of 5.5 percent (annualized) in the first quarter.

The most recent monthly labor market report was disappointing, but employment tends to lag improvements in economic performance. Nothing in the incoming data has altered our view that the economy is nearing a bottom and will soon begin a very slow recovery.
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Often a deep recession is followed by a sharp rebound in business and overall economic activity. Unfortunately, as I look ahead, I do not foresee this trajectory. I expect real growth to resume in the second half and progress at a modest pace. I do not see a strong recovery in the medium term.

I judge the economy at or near the bottom of the cycle.

I am not suggesting a V-shaped cycle.  I think ... it will be a very slow recovery, given the seriousness of the problems in the financial industry and the slowness with which the capital in those institutions will be rebuilt.

As reported by Reuters.

Despite a fairly continuous stream of negative news, I continue to think that improvement in the economy is close at hand. At economic turning points—when activity moves from recession to positive growth, for example—the data are inevitably mixed, and there now are in fact positive signs of stabilization

Economic conditions are stabilizing or, where they are still deteriorating, appear to be doing so more slowly. But economic activity is still at a low level.

[T]here have been some favorable developments of late, and the possibility that the economy is closer to a turning point is stronger now than just three months ago. Although the data have been uneven, our reading of the recent indicators is that the pace of contraction is slowing and that activity is bottoming out. We expect modest increases in output in the second half of this year followed by somewhat stronger growth in 2010.

Right now, we’re like a patient in intensive care whose condition has stabilized and whose fever is just starting to come down. We’re just completing the sixth quarter of recession, but the pace of decline has slowed markedly. The news during the past few months has been encouraging.

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I expect the recession will end sometime later this year. That would make it the longest and probably deepest downturn since the Great Depression.

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I don’t like taking the wind out of the sails of our economic expansion, but a few cautionary points should be considered. I expect the pace of the recovery will be frustratingly slow. It’s often the case that growth in the first year after a recession is very rapid. That’s what happened as we came out of a very deep downturn in the early 1980s. Although I sincerely wish we would repeat that performance, I don’t think we will.

I expect that we will turn the growth corner sometime later this year, but I am not optimistic that the economy will spring back to normal anytime soon. What’s more, I expect the unemployment rate to remain painfully high for several more years.

I expect to see further deterioration in some areas, notably job market conditions, before our policies gain full traction. Weak economic news by itself would not imply that we have misjudged the size of our latest actions. In my view, it would take a significant deterioration relative to our outlook for me to view our current policies as inadequate.

[T]he possibility that the economy is close to a turning point is stronger now than just two months ago. Financial market spreads have improved even as long Treasury and mortgage rates have increased. And disinflationary pressures have been weaker than we had feared.  Part of rightsizing will be to decide where boldness ends.

Currently, with core inflation near 2 percent, I see inflation at a level that would be acceptable under normal circumstances. But these two potentially strong forces work in opposite directions {inflationary and deflationary}, and the Fed must be in a position to respond, whichever force dominates.

In the normal course of our work, the Atlanta Fed produces a forecast of economic growth, unemployment, and inflation. Like most forecasters, we see the economy beginning to recover in the second half of this year.

For the medium and longer term, however, I expect growth will be relatively subdued for some time after it turns positive. My thinking is the economy has to go through structural adjustments that could lower the trend rate of growth for the recovery's first couple of years at least.

Moreover, I believe there are ongoing threats that pose downside risks to sustained recovery.