In the attached summary of forecasts, real GDP is expected to come in between flat and 0.3% for 2008. In the following year, the Fed's prediction ranges from -0.2% to +1.1%. In the June forecast, the Fed was expecting 2009 growth to come in between 2.0% and 2.9%.

"In 2010, real GDP growth was expected to pick up to near the rate of potential growth, as the restraints on household and business spending from the financial market tensions were anticipated to begin to ease and the contraction in the housing market to come to an end," the minutes read.

The summary says the unemployment rate could tick up as high as 7.6% in 2009, before moderating to a level between 5.5% and 6.6% in 2011.

"With growth below its potential rate for an extended period, the unemployment rate was expected to rise significantly through early 2010. The staff reduced its forecast for both core and overall PCE inflation, as the disinflationary effects of the receding cost pressures of energy, materials, and import prices and of resource slack were expected to be greater than at the time of the September FOMC meeting," the minutes said.

Core inflation, which excludes volatile energy and food components, was projected to slow considerably in 2009 and then to edge down further in 2010.

"Tight credit conditions, the ongoing housing contraction, and some slowing in export growth were likely to weigh on economic growth over the next few quarters," the minutes read.

Noting that monetary easing has been "substantial," participants at the meeting said it would be crucial to restore normal interest rates as financial conditions improve. However, they recognized that further turmoil could require the FOMC to lower its target rate below 1.00%.

The vote on Oct. 29 was unanimous, and the minutes appear to indicate that Committee members entered the meeting in agreement that easing was warranted.

"The recent substantial tightening in financial conditions, the sharp downshift in spending here and abroad, and the rapid abatement of upside inflation risks all suggested that a forceful policy response would be appropriate," the minutes said.

Some participants were concerned, however, that further rate cuts "might have limited efficacy in promoting a recovery in economic growth." Others took the position that "the possibility of reduced policy effectiveness and the limited scope for reducing the target further were reasons for a more aggressive policy adjustment."

Concerns that deflation could set in were mentioned just once, and only in passing. Participants in favour of more aggressive easing said a lower target rate "should reduce the odds of a deflationary outcome."

Speaking on CNBC following the minutes' release, Pimco's Bill Gross said the Fed funds rate at 1% is not low enough.

By Patrick McGee, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Nancy Girgis, This email address is being protected from spam bots, you need Javascript enabled to view it

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