Risks to recovery have increased: Fed's Dudley (by Greg Robb)

WASHINGTON (MarketWatch) -- Recent disappointing data suggest that downside risks to the outlook have increased, said William Dudley, the president of the New York Fed, on Friday. The renewed drop in home prices could dampen consumer spending, prompting businesses to limit hiring, Dudley said in a speech to the Brooklyn Chamber of Commerce. Aggressive government spending cuts could also slow growth in the short and medium term, he said. "I still believe that [these issues] remain risks rather than the most likely outcomes," Dudley said, adding that his forecast is for a moderate recovery to continue but at a pace that is painfully slow for unemployed workers. Dudley said he expects headline inflation to moderate, provided that commodity prices stop rising rapidly.