Oct. 22 (Bloomberg) -- Federal Reserve Bank of Boston President Eric Rosengren said the U.S. economy is at risk of relapsing into recession after expanding in the second half of 2009.

“It’s certainly a risk,” Rosengren said today in an interview with CNBC, when asked about the danger of a relapse. “That’s why we don’t want to take the stimulus away too quickly.”

A report from the Fed’s 12 district banks yesterday portrayed an economy on the mend with little danger of inflation. District banks saw “stabilization or modest improvements” in many areas of the economy, with “little or no” price pressures, according to the Beige Book report.

At their meeting last month, policy makers repeated their promise to keep interest rates exceptionally low for “an extended period” and pushed back the end-date of their program to purchase $1.45 trillion of mortgage-backed securities and housing agency bonds by three months.

The jobless rate and inflation, excluding food and energy costs, are both “pretty far away from where we’d like to end up,” Rosengren told CNBC. “We need to wait until we make a little bit more progress on the economy before it’s appropriate to take some of the stimulus away.”

Demand for bank loans was “weak or declining,” and many districts reported a “further erosion of credit quality,” the central bank said yesterday in its Beige Book business survey, published two weeks before officials meet to set monetary policy.

‘Reasonable Growth’

“It looks like both the third and fourth quarter are going to have reasonable growth,” and the 3 percent estimate of private forecasters “seems ballpark likely,” Rosengren said in Chatham, Massachusetts, where his bank is hosting a conference. “The one issue that we have is what happens as we get into the beginning of next year.”

If economic growth unexpectedly quickens, “then it would be very appropriate to take the accommodation away quickly,” he said. Rosengren isn’t a voting member of the rate-setting Federal Open Market Committee this year.

Asked about the weakening U.S. dollar, Rosengren said “the movement we’ve seen to date is a pretty natural movement that reflects people’s comfort level with the fact that” the U.S. and other economies are recovering and investors are shifting into riskier assets.

“We care about the dollar to the extent that it impacts inflation and unemployment,” he said.

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net.

Last Updated: October 22, 2009 08:44 EDT