Adding to the general gloom on the Street today was the release of the latest Federal Open Market Committee's (FOMC) meeting minutes. More specifically, the edited minutes of the policymakers' closed-door meeting on October 28 and 29 revealed that Fed governors and bank presidents expect the U.S. economy to contract moderately in the latter half of 2008, continuing into the first half of 2009.

When the economic respite does come, the committee expects the recovery to be "relatively gradual," predicting that "financial stresses would recede only slowly, notwithstanding the extraordinary measures that had been taken." The meeting attendees downgraded their formal economic forecasts, with the consensus now expecting gross domestic product to grow between 0% and 0.3% in 2008, and dock between negative 0.2% and positive 1.1% in 2009. At their last meeting, the members predicted growth between 1% and 1.6% in 2008, and between 2% and 2.8% next year.

Meanwhile, the Fed expects inflation to subside materially in the coming quarters "to levels consistent with price stability." The policymakers predict inflation to moderate to a 1.3% to 2% pace next year, with core inflation forecast at 1.5% to 2%.

Furthermore, the FOMC now predicts the unemployment rate to average between 6.3% and 6.5% at year's end, and 7.1% to 7.5% in 2009. Three months earlier, the FOMC projected unemployment to remain below 6% throughout the period.