Fed officials warn of looming problems for economy

The Federal Reserve is open to taking further action to support the struggling U.S. economy. But minutes of the Fed's June meeting show policymakers at odds over whether the economy needs more help now.

Fed officials signaled their concern that the struggling U.S. economy could worsen if Congress fails to avert tax hikes and across-the-board spending cuts that kick in at the end of the year. And they expressed worries that Europe's debt crisis will weigh on U.S. growth.

Some members noted that defense contractors are already laying plans for layoffs if lawmakers don't address the package of tax hikes and spending cuts by the end of the year. Members warned that tighter government spending could slow the economy well into next year.

The Fed downgraded its economic outlook. It now expects growth of just 1.9% to 2.4% in 2012, half a percentage point lower than its April forecast.

A few members said the economy may already require additional support. But several others noted that further action "could be warranted" if the recovery lost momentum, if risks became more pronounced or inflation seemed likely to run below the committee's target.

Investors appeared disappointed by the division within the Fed. Read more.......