U.S. Fed sees further stimulus maybe needed

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The Federal Reserve saw the U.S. economic recovery was proceeding at a "moderate pace," but further monetary stimulus may be needed if the economy shows more serious signs of slowing, according to minutes of the latest central bank meeting released on Wednesday.

Top officials of the Fed said that they continued to anticipate a moderate recovery in economic activity through 2011, supported by accommodative monetary policy.

With risks now growing, Fed officials at their June 22-23 meeting saw the need to explore new options for bolstering the economy. That's a turnaround from earlier this year when they were moving to wind down crisis-era supports.

According to the Federal Open Market Committee (FOMC), the central bank's policy making group which meets eight times a year to set interest rates, the Fed was considering whether to implement further policy stimulus if the outlook were to worsen appreciably.

Fed officials projected economic growth in 2010 will reach 3.0 to 3.5 percent, lower than in April when the Fed presented a relatively stronger forecast, saying the economy can grow between 3.2 percent and 3.7 percent this year.

The new document showed that Fed officials saw the "economic outlook had softened somewhat." One-half of Fed officials saw " risks to growth as having moved to the downside."

Looking forward, the Fed expects the economy will grow 3.5 to 4. 2 percent in 2011 and 3.5 to 4.5 percent in 2012.

The central bank also projected that the average unemployment rate in the fourth quarter of 2010 was 9.2 to 9.5 percent, slightly higher than its previous forecast of 9.1 to 9.5 percent.

Unemployment, currently at 9.5 percent in June, is a key concern of the Obama administration.

To tackle the financial crisis and foster the recovery, the Fed has left a key bank lending rate at between zero and 0.25 percent since December 2008. That has kept rates on certain credit cards, home equity loans, some adjustable-rate mortgages and other consumer loans at their lowest points in decades.

As the economic outlook is getting worse than expected, economists predict the Fed will keep the key rate at record low well into next year and possibly into 2012.

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