Fed worried about fragile recovery
The central bank's policymakers said they are more optimistic about future growth but are still unsure as to whether the economy has turned the corner.
NEW YORK (CNNMoney.com) -- Federal Reserve policymakers were pleased by signs of improvement in the U.S. economy but added that the recovery is still fragile, according to the minutes of their most recent meeting.
The minutes, released Wednesday, give a more detailed economic outlook than the Fed's brief statement following its meeting three weeks ago. Top officials of the central bank said in the minutes they viewed the economy "as likely to recover only slowly during the second half of this year, and all saw it as still vulnerable to adverse shocks."
Policymakers also indicated that they remain particularly concerned about the state of the labor market -- despite improvements in some employment readings in recent months.
Fed members added that the chances of the economy getting worse are "now considerably reduced" but that the recovery is "likely to be damped."
Those concerns are likely the biggest reason why the Fed left its key interest rate near 0% at the meeting and did not announce any move to pull back on the more than $1 trillion it has pumped into the economy over the last year through various lending programs.
Still, there is a growing consensus among economists that the economy entered into a period of recovery sometime this summer.
Central bankers echoed that optimism, saying in the minutes "that the incoming data and anecdotal evidence had strengthened... confidence that the downturn in economic activity was ending and that growth was likely to resume in the second half of the year."
But Fed members also expressed concerns about a continued squeeze on household budgets caused by tight credit, falling wages and declines in home values in recent years. The Fed said this would be a drag on consumer spending, and added they were not sure when "credit conditions would normalize."
The Fed's next policy meeting is a two-day session that will conclude on September 23. It is widely expected that the central bank will leave rates alone yet again.
Still, there appears to be some debate among Fed members about what to do next. While Fed policymakers have unanimously approved most major decisions over the past year, Fed members pointed to "a range of views, and considerable uncertainty, about the likely strength of the upturn" at the most recent meeting.
Since that meeting, President Obama nominated Federal Reserve chairman Ben Bernanke for a second four-year term as head of the central bank. That appointment needs the ratification of the Senate.
Bernanke has won praise from some economists for his handling of the financial crisis. But some critics maintain he did not do enough to prevent the crisis in the first place and others fear that the combination of low interest rates and loose credit policies will lead to a dramatic rise in inflation sometime soon. 
