At the end of a two-day meeting, the Federal Open Market Committee, which sets interest rates, offered a bleaker picture of the US economy than it had at its last gathering two months ago. It noted that employment growth had slowed, and consumer spending was rising at a weaker pace. US markets swung between gains and losses for most of the day, but stocks fell and the US dollar rebounded after the Fed cut its growth estimates. The Fed warned that global financial strains continued to pose "significant downside risks" to the economic outlook. Officials cut forecasts for US growth this year, to a range of 1.9 to 2.4 per cent, from between 2.4 and 2.9 per cent in their previous projection in April. But in a sign that the Fed remains divided over the seriousness of the recent deterioration in the economy and the effectiveness of bolder steps to address the slump, it stopped short of approving a fresh expansion of the central bank's balance sheet through new asset purchases - known as "QE3." The Fed however did make an explicit pledge to do so if conditions worsen. "The committee is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labour market conditions in a context of price stability," the FOMC said. At a press conference after the meeting, Ben Bernanke, Fed chairman, added: "We are prepared to do what's necessary. We are prepared to provide support for the economy. In the end, the Fed on Wednesday coalesced around a more limited plan to continue "Operation Twist" through the end of the year. The FOMC said it would buy Treasuries with maturities of 6 to 30 years worth $267bn, while selling those with durations of 3 years or less. "This continuation of the maturity extension programme should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative," it said. Only Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, voted against the move. "The decision was a "no brainer" for the Fed," said Paul Edelstein, director of financial economics at IHS Global Insight. "It pays for the Fed to insure against downside possibilities," he said. Some investors were disappointed with the statement after expectations of bolder action helped support a rally in so-called risk assets in the past two weeks. "The lack of QE should not spook the market too much but it must make the market sit up and take notice that further easing is only coming if the wheels are coming off the recovery," said David Semmens, a US economist at Standard Chartered. In its statement, Fed officials said inflation had declined amid lower prices of crude oil and petrol, a reversal of the pick-up in inflation that was noted in April. This could give the central bank more room to pursue monetary easing in the coming months if the economic picture continues to darken. The Fed also maintained its assessment that "exceptionally low" interest rates would remain necessary until the end of 2014, at the earliest. Fed officials also raised their estimate for the unemployment rate in the final quarter of this year, to a range of 8 to 8.2 per cent from between 7.8 and 8 per cent.