* Fed officials raise growth forecasts - minutes
* Policymakers see smaller downside risks to recovery
* Some backed trimming bond buys if recovery picks up
(Adds background, details)
By Mark Felsenthal and Pedro Nicolaci da Costa
WASHINGTON, Feb 16 U.S. Federal Reserve
officials raised their forecasts for economic growth last month
but remained unhappy with the job market's recovery.
Minutes of the Fed's Jan. 25-26 policy session released on
Wednesday suggested the consensus was still firmly aligned with
completing the planned purchase of $600 billion in government
bonds. A few Fed members questioned whether continued stronger
data would call for curtailing the program.
Officials believed downside risks to the recovery were
dissipating and there was no mention of a potential extension
of the bond purchase plan, the minutes showed.
"Participants generally expressed greater confidence that
the economic recovery would be sustained," the minutes stated.
Despite that rosier assessment, policymakers expected only
slow progress reducing unemployment and some said it was
unlikely the recovery would strengthen so significantly that it
would warrant curbing the bond buying plan.
"Overall, meeting participants continued to express
disappointment in both the pace of and the unevenness of the
improvements in labor markets," the minutes said.
U.S. Treasury debt prices, which had already slipped on a
firm reading on producer prices, extended losses after the
release of minutes.
"It's steady as she goes, but it's not enough to bring down
unemployment," said Scott Brown, chief economist at Raymond
James in St. Petersburg, characterizing the Fed's assessment of
the economy. He said the Fed would likely hold off raising
overnight interest rates, which are currently near zero, until
early next year.
Fed officials raised their 2011 growth forecast to a range
of 3.4 percent to 3.9 percent from their November projection of
3 percent to 3.6 percent, although projections for 2012 and
2013 were little changed.
Policymakers also made only minor changes to forecasts for
unemployment and inflation.
The U.S. jobless rate was projected to be in a range of 8.8
percent to 9 percent in the fourth quarter of this year, with
unemployment declining only gradually over the Fed's three-year
forecast horizon. In November, the Fed expected the
unemployment rate to be in an 8.9 percent to 9.1 percent
For a text of the FOMC's policy discussion, see [FED/MINS]
For a table of forecasts from Fed policymakers, see
For a text of the Fed staff forecasts, see [FED/FCAST1]
For more stories on Fed policy, see [FED/AHEAD]
DIVIDED ON INFLATION
Government data released after the Fed's January meeting
showed unemployment dropped to 9 percent that month, putting
the jobless rate already at the upper point of the Fed's
forecast for the last three months of the year.
The Fed's 2011 forecast range for inflation moved only at
the low end, shifting to 1.3 percent to 1.7 percent from the
1.1 percent to 1.7 percent anticipated in November.
Commodity price increases around the world have stirred
inflation fears and prompted accusations the Fed is behind the
Fed Chairman Ben Bernanke is likely to face questions about
the Fed's easy money policies at a meeting of top finance
officials from the Group of 20 leading economies in Paris this
weekend. Some emerging market nations have blamed the Fed for
fueling a global inflation that is harming their economies.
A report on Wednesday showed underlying U.S. wholesale
inflation rose at the fastest pace in more than two years in
January, a potentially worrying sign that higher prices for
energy and food are passing through to other prices.
Economists, however, said they expected only limited
pass-through to U.S. consumer prices. [ID:nN16ST1]
The Fed minutes showed some policymakers saw the rise in
energy and other commodity prices as a risk, but most officials
believed high unemployment would likely keep inflation, which
is below the Fed's preferred range of just under 2 percent,
well in check.
In a statement it issued at the conclusion of its January
meeting, the Fed noted the brighter outlook for the economy. By
unanimous vote, policymakers agreed to remain on course with
their plan to buy longer-term Treasury securities to boost
The minutes showed some policymakers were uncertain about
the impact the bond buying program would have on the economy,
but believed it was best to follow through with plans already
laid, according to the minutes.
Others said that if growth picked up more strongly than
expected, the central bank should consider curtailing the
program. Richmond Fed President Jeffrey Lacker has made that
suggestion publicly in speeches since the meeting.
(Reporting by Mark Felsenthal and Pedro da Costa, and Richard
Leong in New York, Editing by Chizu Nomiyama and Andrew Hay)