Is a recession a serious risk — or is it mostly in Wall Street’s mind? Financial markets have descended into a major funk in the last two weeks, driving key stock indexes to their lowest levels in more than a year, the Los Angeles Times rerpots.

But some analysts say the action in stocks and bonds is overstating the chances of grave trouble in the economy.

And they contend that the Federal Reserve, Congress and the Bush administration are being goaded by markets to take economic-stimulus measures that may be costly, excessive and even unnecessary.

“The administration, Congress, the Fed and the day traders on Wall Street all seem to be in panic mode,” said Allan Meltzer, a veteran economist and Fed watcher at Carnegie Mellon University in Pittsburgh.

To be sure, the majority of economists might well argue that it’s better for policymakers to be safe than sorry with their responses to the housing market slump and the risks it poses to the broader economy.

Yet despite the slowdown in business and consumer activity in recent months, there is no consensus that the economy is heading for a recession, usually defined as a contraction lasting at least six months.

In its latest report on regional trends in the economy, the Fed said Wednesday that the expansion continued in late November and December, albeit “at a slower pace.”

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