William C. Dudley, president of the Federal Reserve Bank of New York, estimated that the economy expanded at just a 1% annual rate in the first three months of the year.
That would be less than half the previous quarter's growth rate and the worst performance since a weather-induced 2.1% contraction in the first quarter of last year.
Dudley, in the first public comments by a Fed policymaker on the employment data released Friday, warned of "some downside risks" to the economic outlook that will continue through the spring.
Those risks, he said, are "a further sharp drop" in U.S. oil and gas investment because of low crude oil prices and weaker U.S. trade because of the soaring value of the dollar.
The timing of the Fed's first hike in its benchmark interest rate since 2006 will depend on "how the economic outlook evolves," Dudley said in a speech at the New Jersey Performing Arts Center in Newark.
If the labor market continues to improve and inflation begins to pick up, as he expects, "then it would be appropriate to begin to normalize interest rates."
Job growth slowed sharply in March, with the economy adding just 126,000 net new jobs. Recent labor market weakness has led to speculation that the Fed might hold off on raising interest rates, which analysts had expected could begin as early as June.
"The March labor market report is another indicator that the first quarter is likely to be quite weak," Dudley said, pointing out that the report showed a broad-based slowdown in job creation last month.
"It will be important to monitor developments to determine whether the softness in the March labor market report ... foreshadows a more substantial slowing in the labor market than I currently anticipate," he said.
The recent "downside surprises" in key economic data reflect "temporary factors to a significant degree," he said.
Dudley's staff found that the effects of snow and winter weather in the Northeast and Midwest were 20% to 25% more severe than the five-year average.
"Such large deviations appear to have meaningful negative impacts on a number of economic indicators," he said.
When the Fed starts raising the benchmark federal funds rate from its current level near zero, the central bank will move slowly because "headwinds in the aftermath of the financial crisis are still in evidence, particularly the diminished availability and tougher terms for residential mortgage credit," he said.
At this point, Dudley projected the federal funds rate eventually would rise to 3.5%, "but I wouldn't bet the farm on this."
"I have considerable uncertainty about this estimate," he said.