Economy Recovery Moving Slower Than Expected, Note Fed Officials

Federal Reserve officials were slightly more downbeat about the economy's progress at their last meeting in June, according to minutes of the meeting released July 14.

"The economic outlook had softened somewhat, and a number of members saw the risks to the outlook as having shifted to the downside," the minutes from the Federal Open Market Committee stated.

The downgrade was modest, the minutes noted, not requiring a change in policy, which includes keeping short-term interest rates near zero for an "extended period."

"However, members noted that in addition to continuing to develop and test instruments to exit from the period of unusually accommodative monetary policy, the Committee would need to consider whether further policy stimulus might become appropriate if the outlook were to worsen appreciably," the minutes said.

Slow consumer spending, the European debt crisis, slow employment growth, and a tough housing market were among the concerns. Although the Fed doesn't set mortgage rates, savings interest rates, money market rates, or other consumer rates, banks follow the Fed's interest rate lead in what they offer their customers.

When Will Interest Rates Rise? Future Unusually Uncertain

Committee members' economic forecasts suggested they expect the recovery to continue and inflation to remain subdued, but with slightly weaker activity and lower inflation than in the predictions they made in April. Most considered their forecasts subject to "greater-than-average uncertainty," the minutes stated.

The committee's decision to maintain current monetary policy was announced in June, but investors read minutes closely to search for any clues in discussion about policy language and rates. Stocks slipped July 14, breaking a six-day winning streak, after the minutes were released. Although the fact that the recovery will be slow and painful is nothing new, the minutes served as a sharp reminder.