WASHINGTON -- Benchmark U.S. interest rates are at the right level now to help the sputtering U.S. economy, but elevated inflation and uncertainty about housing and financial markets remain worrying, Federal Reserve Vice Chairman Donald Kohn said Tuesday.

"With the information now in hand, it is my judgment that monetary policy appears to be appropriately calibrated for now to promote both rising employment and moderating inflation over the medium term," Kohn said in remarks prepared for delivery to a conference in New Orleans.

"But a large measure of uncertainty surrounds that judgment and as the economy evolves, so will the appropriate stance of policy," he added.

Kohn said the Fed will be watching inflation developments closely, and expressed concern that if longer-term inflation expectations edge higher, policy-makers will be facing "a more serious situation."

At the same time, he said officials will be carefully watching whether the U.S. economy can recover from the effects of a two-year housing slump and related credit crunch.

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"We need also to carefully assess whether, after a period of near-term softness ..., the economy is likely to be on track for sustained economic expansion over time," he added.

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