Fed's Dudley: Economy still faces headwinds (by Greg Robb)

WASHINGTON (MarketWatch) - Despite incoming data that suggests the U.S. economy is on firmer footing, it is too soon to say that the U.S. is out of the woods, said William Dudley, the president of the New York Federal Reserve Bank, on Monday. "W cannot lose sight of the fact that the economy still faces significant headwinds and there are some meaningful downside risks," Dudley said in a speech in Melville, New York. One headwind is the recent rise in gasoline prices, which might "sap purchasing power," he said. Dudley was optimistic on the inflation outlook. Despite higher gas prices, the Fed expects the moderation in consumer prices to resume later this year. In addition, core inflation has peaked and the Fed expects it to begin to decline later this year, Dudley said.