The U.S. Federal Reserve on Wednesday lowered its forecasts for economic growth this year and next, acknowledging the possibility of a recession into 2009.

The U.S. economy would remain "very weak" next year and "the subsequent pace of recovery would be quite slow," according to the minutes of the Fed's last policy-making meeting held late October.

Under its new forecasts, the Fed now believes the world's largest economy could be flat or grow by just 0.3 percent this year. It could actually shrink by 0.2 percent or expand by 1.1 percent next year.

Both sets of projections are lower than the Fed's forecasts made in July this year.

The weaker economic activity will push up unemployment. The Fed projected that the jobless rate will rise to between 6.3 percent and 6.5 percent this year and climb to between 7.1 percent and 7.6 percent next year. The forecasts are also higher than its summer estimate.

The unemployment rate in October was 6.5 percent, higher than last year's average of 4.6 percent.

Facing the likelihood of "significant weakness" in the economy, the Fed suggested "additional policy easing could well be appropriate at future meetings," according to the documents.

At its Oct. 29 meeting, the Fed cut interest rates to 1 percent, a level seen only once since 1958.

But Fed officials at the same time worried that the effectiveness of previous rate cuts "may have been diminished by the financial dislocations, suggesting that further policy action might have limited efficacy in promoting a recovery in economic growth," the documents said.

The U.S. economy contracted in the third quarter of this year at an annual rate of 0.3 percent. This was the worst showing since the economy shrank at a pace of 1.4 percent in the third quarter of 2001, when the nation was suffering through its last recession.

(Xinhua News Agency November 20, 2008)