Federal Reserve officials saw no need to boost stimulus to the economy while trimming their forecasts for growth and noting that risks to the recovery had increased, minutes of their June meeting showed.

“The economic outlook had softened somewhat and a number of members saw the risks to the outlook as having shifted to the downside,” minutes released today in Washington said. “The changes to the outlook were viewed as relatively modest and as not warranting policy accommodation beyond that already in place.”

Slowing inflation, constrained household spending and contracting credit prompted Fed policy makers last month to restate a pledge to keep the benchmark lending rate at around zero for “an extended period,” the Fed’s statement showed.

The minutes indicated that U.S. central bankers were concerned about lingering high unemployment and risks that inflation could decelerate further. If the outlook worsened, the committee would need to consider whether additional stimulus was appropriate, the minutes said.

Stocks extended declines after the minutes were released, with the Standard & Poor’s 500 Index falling 0.3 percent to 1,091.83 at 2:06 p.m. The yield on the two-year Treasury note fell six basis points to 0.61 percent.

Consumer borrowing fell $9.1 billion in May following a $14.9 billion decrease in April. Non-government employers added just 83,000 jobs in June, less than the 110,000 forecast by economists.

Financial Markets

Concerns about European government deficits roiled global financial markets, sending the Standard and Poor’s 500 stock index 5.4 percent lower last month.

“Participants expected the pace of hiring to remain low for some time,” the minutes said. “The unemployment rate was generally expected to remain noticeably above its long-run sustainable level for several years, and participants expressed concern about the extended duration of unemployment spells for a large number of workers.”

U.S. central bankers lowered their central tendency forecast for 2010 growth to a range of 3 percent to 3.5 percent versus 3.2 percent to 3.7 percent in April, the minutes show. They also trimmed their outlook for inflation this year to a range of 1.0 percent to 1.1 percent, down from 1.2 percent to 1.5 percent in April.

Forecasts for unemployment were little changed, with the Fed expecting unemployment between 9.2 to 9.5 percent in 2010 versus 9.1 to 9.5 percent in April.

Instruments for Exit

“Members noted that in addition to continuing to develop and test instruments to exit from the period of unusually accommodative monetary policy, the Committee would need to consider whether further policy stimulus might become appropriate if the outlook were to worsen appreciably,” the minutes said.

Sales at U.S. retailers fell in June for a second month, indicating the pace of economic recovery moderated heading into the second half of 2010. Purchases decreased a more-than- projected 0.5 percent following a 1.1 percent May drop, Commerce Department figures showed today in Washington.

While retail demand softened in May, industrial companies with global reach are posting strong second-quarter profits.

“You have some surges, some slower periods,” Richmond Federal Reserve Bank President Jeffrey Lacker told reporters July 12. “It’s just going to be a choppy recovery.”

Quarterly Profits

Alcoa Inc., the largest U.S. aluminum producer, this week reported second-quarter profit that topped analysts’ projections as higher metals prices boosted sales. Intel Corp., the world’s biggest chipmaker, reported record sales and topped analysts’ estimates with its third-quarter forecast July 13, reducing concerns that the personal-computer industry’s rebound is losing steam.

“The business sector is generally strong, with fat profits, lean balance sheets, and improved, if not stellar, demand,” Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, said before the minutes were released. “The bridge to a stronger consumer is the hiring that businesses should be doing but are not because the near future is too cloudy.”

Kansas City Federal Reserve Bank Fed President Thomas Hoenig dissented from the decision for the fourth straight meeting. Hoenig said that while risks to the forecasts remained, continuing to indicate that rates would remain low “for an extended period” would “limit the Committee’s flexibility to begin raising rates modestly in a timely fashion.”

Balance Sheet

Total assets on the Fed’s balance sheet stand at $2.33 trillion, near a record high of $2.34 trillion reached May 19. U.S. central bankers, as they have in past meetings, discussed longer-term strategies for reducing assets held by the Fed.

“A majority of participants continued to anticipate that asset sales would start after the Committee had begun to firm policy by increasing short-term interest rates,” the minutes said.

The Labor Department’s consumer price index fell 0.2 percent in May after a 0.1 percent drop in April, the first consecutive decline since 2008. Excluding food and energy, the core rate rose 0.9 percent in May from a year earlier, matching the smallest year-over-year gain since 1966.

Central bankers in June said their longer-run inflation goal is 1.7 percent to 2 percent, measured by the personal consumption expenditures price index. The PCE index rose 1.9 percent for the 12 months ending May.