By Mark Felsenthal
"The prominence of downside risks means that further easing ultimately may be warranted," Lacker said in a speech to a banking group.
Lacker's acknowledgment of the possibility of recession comes as economic data increasingly point to weaknesses in the economy and is among the most pessimistic assessments of the U.S. economy by a Fed official in recent weeks.
"I can also see the possibility of a mild recession, similar to the last two we have experienced -- in other words, shallow and with a short recovery," he said.
"If job growth is positive in the months ahead, and if wages can stay ahead of inflation, then income growth should be sufficient to support consumer spending gains and allow us to skirt the boundary of recession," he said.
The Fed cut U.S. interest rates by a cumulative 1.25 percentage points in January in a rush to prevent the economy from sliding into recession as a result of a collapse of housing markets and a credit crunch.
The world's largest economy struggled to the end of the year, showing growth of just 0.6 percent in the last three months of 2007, and employers shed 17,000 jobs in January, the first decline in payrolls in 4-1/2 years.
