Fed lowers forecasts through 2011

Federal Reserve officials have become more pessimistic in their economic outlook through next year and have lowered their forecast for economic growth.

Fed officials said in an updated forecast that the economy would grow only 2.4 percent to 2.5 percent this year, down sharply from a previous projection of 3 percent to 3.5 percent. Next year, the economy will expand by 3 percent to 3.6 percent, down from the previous forecast of 3.5 percent to 4.2 percent.

The revised outlook was released Tuesday as part of the minutes of the Fed's Nov. 2-3 meeting.

The darker view helps explain why the Fed decided at the meeting to launch another round of stimulus. The central bank plans to buy $600 billion in Treasury bonds over the next eight months in an effort to lower interest rates and spur spending.

However, the minutes showed that Fed policy-makers disagreed over expanding the stimulus, with a majority wanting it as a way of boosting economic growth and employment. But a minority was concerned about risks to inflation and the dollar.

Most officials at the meeting saw additional securities purchases as keeping interest rates low and boosting asset prices, the Fed said in the minutes. The Fed also said it was considering ways to improve communication with the public, such as initiating briefings by chairman Ben S. Bernanke.

The report illustrates the tension within the Fed over the decision to buy $600 billion of Treasuries, which has since attracted criticism from Republican politicians at home and some governments abroad. Increased internal disagreement over the purchases may hamper officials' resolve to complete the entire amount of purchases scheduled through June.

Most expected the purchases "to help promote a somewhat stronger recovery in output and employment while also helping return inflation, over time, to levels consistent with" the Fed's legislative mandate, the minutes said. There has been concern that inflation is too low - so that it will depress not only prices consumers pay at the store, but also hold down wages, stock prices, and home prices.

Some policy-makers raised their long-run jobless-rate projection, signaling they see some further permanent effects from the recession on U.S. unemployment. The median range rose to 5 percent to 6 percent from 5 percent to 5.3 percent.