Fed sees firmer U.S. growth

By Pedro da Costa and Mark Felsenthal

WASHINGTON (Reuters) - Federal Reserve officials are increasingly confident the U.S. economic recovery will be durable, but do not see employment or inflation picking up soon, minutes from their November meeting showed.

Senior Fed officials, meeting on November 3-4, also expressed concern their plans to keep interest rates low for a prolonged period could have negative repercussions, including possible speculative activity in financial markets.

"Most participants now view the risks to their growth forecasts as being roughly balanced rather than tilted to the downside," according to the minutes, which were released on Tuesday and were accompanied by upward revisions to policy makers' growth forecasts.

"Some negative side effects might result from the maintenance of very low short-term interest rates, including the possibility that such a policy stance could lead to excessive risk-taking in financial markets or an unanchoring of inflation expectations," they said.

The comments helped U.S. stocks to pare losses.

The Fed cut benchmark interest rates to near zero percent last December and has pumped more than $1 trillion into the economy to beat back a severe recession and restore growth.

After their meeting earlier this month, policy makers repeated a pledge to keep rates exceptionally low for "an extended period."

Many observers, including influential investors and some officials, have argued that the Fed's policy of rock-bottom borrowing costs may be driving investors to lever up their bets by using the falling U.S. dollar to fund their trades.