Fed officials expect U.S. economy to begin recovery in second half of 2009

WASHINGTON, Jan. 6 (Chinese media) -- Officials at the U.S. Federal Reserve expected that the world's largest economy would begin to recover in the second half of 2009, according to the minutes of the Fed's December 15-16 meeting released Tuesday.

Most participants of the meeting projected that "the economy would begin to recover slowly in the second half of 2009, aided by substantial monetary policy easing and by anticipated fiscal stimulus," said the minutes.

However, participants expected economic activity to contract sharply in the fourth quarter of 2008 and in early next year, the document said.

They generally agreed "that the uncertainty surrounding the outlook was considerable and that downside risks to even this weak trajectory for economic activity were a serious concern."

To help fight the ongoing worst financial crisis since the 1930s, the Fed slashed a key interest rate once again at the December meeting to a target range of zero to 0.25 percent, a record low. The rate stood at 5.25 percent last summer.

Despite the aggressive rate cuts and other bold actions taken by the Fed, "the economic outlook would remain weak for a time and the downside risks to economic activity would be substantial," according to the document.

Participants at the December meeting observed that financial strains continued to exert a powerful drag on economic activity and that the adverse feedback loop between financial conditions and economic performance had intensified, the minutes said.

They also noted that economic conditions had deteriorated substantially in recent months in both advanced and emerging market economies. As a consequence, demand for U.S. exports had weakened.