By Vicki Needham - 06/23/10 06:50 PM EDT
Those troubling conditions include low rates of resource utilization, subdued inflation trends and stable inflation expectations, the Fed said in a statement today at the end of a two-day meeting in Washington.
The Fed downgraded its outlook on the nation's economy because of information it has received since its last meeting in April that "suggests that the economic recovery is proceeding and that the labor market is improving gradually."
While household spending is increasing it remains constrained by "high unemployment, modest income growth, lower housing wealth, and tight credit," the Fed said.
Despite continued high unemployment and a contraction of bank lending the Fed anticipates a gradual return to higher levels of resource utilization in a context of price stability, "although the pace of economic recovery is likely to be moderate for a time."