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Cautious Fed cuts forecast for growth

WASHINGTON - Federal Reserve officials cut their forecasts for growth this year and signaled they stood ready to take new steps to keep the recovery alive if the economy takes a turn for the worst.

A new document, released Wednesday, revealed a more cautious mood among the Fed policymakers in light of Europe's debt crisis, a volatile Wall Street, a stalled housing market and high unemployment.

With risks growing, Fed officials at their June 22-23 meeting saw the need to explore new options for bolstering the economy. That's a turnaround from earlier this year when they were moving to wind down crisis-era supports.

No new specific steps were disclosed or agreed upon at that time.

However, if the recovery were to deteriorate, Fed policymakers have options. They could revive programs to buy mortgage securities or government debt. They could lower the rates banks pay for emergency Fed loans. The Fed also could create a new program to spark more lending to businesses and consumers in a bid to lure them to ratchet up spending and grow the economy.

Fed officials now predict the economy will grow between 3 percent and 3.5 percent this year. That's down from forecast of 3.2 percent to 3.7 percent made in April. - AP

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