Market indicators are pointing to an earlier economic recovery from the current recession, perhaps even before the end of 2009, according to statements Monday from Federal Reserve Vice Chairman Donald Kohn.

“The crosscurrents in the recent data and a bit more favorable financial news of late stand in contrast to the uniformly bleak picture of a few months ago,” Kohn said during a speech to the University of Delaware. He added that recent developments “may be an early indication that conditions are falling into place for real GDP to decline at a slower rate in the second quarter and to stabilize later this year.”

Kohn pointed to reports of home sales and new home starts starting to bottom out and even move upward again, and consumer spending leveling out during the first quarter of 2009 as indications that the recession may be over soon.

And while he did comment that the current economic downturn will probably be one of the deepest and longest since World War Two, he also saw plenty of reasons to be optimistic. “I don’t think it is premature to start to ponder the shape that a recovery — when it occurs — would be likely to take.”

Kohn warned that the recovery is not likely to be quick and dramatic, but to take place gradually, especially if Americans continue to save instead of spend until they feel more confidence in the market.

As things start to pick up again, the risk of inflation will grow, requiring the Fed to step in and adjust its spending and interest rate policies, which, Kohn assured the crowd, the Federal Reserve is fully prepared to do.

“We are firmly committed to acting in a way that preserves price stability, and we believe we have the tools to absorb reserves and raise interest rates when needed,” he said.