Nov 20. Instability in the economy and financial markets will most likely continue, while regulation rather than interest rate hikes is the most efficient instrument to prevent new bubbles from forming, Vice Fed Chairman Donald L. Kohn believes. “Although the outlook remains extremely uncertain, the fragility of the financial system and the weakness in real activity seem likely to persist for a while” – Kohn said in his report that he was to deliver at the Cato Institute's Twenty-Sixth Annual Monetary Policy Conference. Fed representatives think the economy will continue to slow down for at least six months. At the same time, he believes the risk of a deflation is slim. "Our economy is very weak and it is slowing right now. I believe that GDP growth will most likely slow down in the next two quarters, inflation will slow, but not spiral into deflation” – Kohn said. According to him, the present crisis caused by the issue of risky loans and dubious actions on US financial markets will be longer than the previous crises due to the scope of the problem, the essence of which lies in housing market problems and bank losses.