WASHINGTON Ground-breaking economic projections from the U.S. Federal Reserve on Wednesday show a central bank braced for a painfully slow recovery, suggesting the possibility of a new round of bond buying remains alive if growth were to flag.
But the forecasts also show a wider range of views at the Fed than voting patterns at its policy meetings have shown, suggesting a vigorous debate among policy makers in months to come.
For the first time, the quarterly forecasts include projections from top policymakers at the U.S. central bank for the path of the federal funds rate, which show that 11 officials don't expect to need to hike rates until 2014 at the earliest.
The new forecasts are the latest step in Fed Chairman Ben Bernanke's long-running campaign to shine more light on the central bank's deliberations.
Far from a public relations exercise, Bernanke and many other economists believe that better understanding of policymakers' thinking will better prepare financial markets for how the Fed will react to changes in the U.S. economy and make the central bank more effective.
The forecasts and projections contained the following insights:
* Five officials see the first likely rate hike in 2014, with four see it in 2015 and two not until 2016. Nevertheless, three see the first rate hike as soon as the end of this calendar year and three see it in 2013, suggesting that any further round of bond buying to boost growth will face stiff opposition internally.
* The Fed lowered its "central tendency" growth forecast for 2012 down to a range of 2.2 percent to 2.7 percent from a previous range of 2.5 to 2.9 percent, bringing it closer to private forecasts. This pace of growth is likely to do little to lower unemployment very quickly and leaves the recovery susceptible to a shock, for example from Europe.
* The Fed's view of unemployment was a little less glum. It nudged down its forecast for the U.S. jobless rate to 8.2 percent to 8.5 percent from a 8.5 percent to 8.7 percent range in 2012 -- recognition that the unemployment rate has already hit 8.5 percent. But, in the Fed's eyes, further progress will be grudging, leaving open the possibility the Fed could buy more bonds to spur stronger growth. It anticipates the jobless rate to remain in the 7.4 percent to 8.1 percent range in 2013.
* The Fed's longer-range projection for unemployment held steady in a range of 5.2 percent to 6 percent. The unemployment forecast, a proxy for the Fed's view of what constitutes full employment, has inched steadily up since the central bank began publishing the number in early 2009. At that time, policymakers thought they could push the jobless rate down to 4.8 percent to 5 percent without generating inflation. The shift in views indicates officials believe the recent recession has left lasting scars on the economy and caused a structurally higher level of unemployment.
(Reporting By Mark Felsenthal; Editing by Chizu Nomiyama)