(Update: Signficantly expands insight into the June Federal Reserve Open Markets Committee meeting.)

In June, the financial wizards at the Federal Reserve announced that they were

leaving its key interest rate untouched. Today, we received a little peek behind the wizards' curtain.

Released this afternoon, minutes from the Federal Reserve Open Markets Committee meeting in June revealed that officials were both hopeful and dour in their assessments of the economy and forecasts for the future.

Data since their April meeting demonstrated to the group that "the economic contraction was slowing and that the decline in activity could cease before long." But because of rising unemployment, weakened spending and tighter credit, the minutes show that many of the officials thought the economy was "still quite weak," with potential for "further shocks" to come.

In a discussion about the financial markets, many officials saw some positive developments, though "underlying financial conditions remained fragile" after much of the market recovery was powered by government support. In another section of the June minutes, many officials expressed that the housing sector was "still vulnerable to weakness," while core inflation was expected to remain "subdued" by most.

Additional asset purchases were ultimately kept at bay over uncertainty of the effect of such a move on the economy. Some thought it would have little effect on the economy without substantially increasing the size of the program, while others were hesitant because of public perception of such a move.

Still, officials at the meeting boosted certain near-term economic projections, but were careful to restrain future growth expectations. Several expressed that it would take 5 or 6 years for the goals of sustainable growth and comfortable levels of unemployment and inflation for the Fed to be fully realized. Unemployment and inflation forecasts were raised.

"Almost all participants viewed the near-team outlook for domestic output as having improved modestly relative to the projections they made at the time of the April FOMC meeting, reflecting both a slightly severe contraction in the first half of 1009 and a moderately stronger, but still sluggish, recovery in the second half," the minutes said.

A pessimistic forecast for labor recovery highlighted the projections. Individual fed officials anticipated unemployment to range between 9.7% and 10.5% in 2009, which was adjusted up from the prior range of 9.1% to 10%. One official even forecast unemployment to come to 10.6% in 2010.

The so-called "central tendency" forecast, which throws out the highest and lowest projections, ranged from 9.8% to 10.1%. April's central tendency unemployment range came between 9.2% and 9.6%.

In June,

unemployment climbed to 9.5%.

Despite that, the group believed that the economy would shrink less than its prior outlook. Individual officials said GDP would contract between 1.6% and 0.6%, down from the 2.5% and 0.5% shrinkage forecast before. Central tendency figures showed GDP shrinking between 1.5% and 1%, which is also better than prior forecasts.

In 2010, the group anticipates the economy to grow between 2.1% and 3.3%, according to central tendency estimates.

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