WASHINGTON, Jan 29: The US Federal Reserve officials on Thursday warned of a prolonged global economic slowdown that might push the United States to the brink of deflation.

The US Federal Open Market Committee, charged under US law with overseeing the nation’s open market operations, warned that its earlier prediction of a “gradual recovery” in the US economy later this year had “significant” risks of failing to materialise.

The warning followed a similar forecast on Wednesday by International Monetary Fund that the world economy would slow to a near standstill this year.

The committee warned that the worldwide economy “appears to be slowing significantly”.

Assessing the US economy, the committee noted that “information received since the committee met in December suggests that the economy has weakened further. Industrial production, housing starts, and employment have continued to decline steeply, as consumers and businesses have cut back spending”.

But the committee also pointed out that conditions in some financial markets had improved, in part reflecting government efforts to provide liquidity and strengthen financial institutions. Nevertheless, credit conditions for households and firms remained extremely tight, it added.

Meanwhile, the US Federal Reserve continued to purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets. It stood ready to expand the quantity of such purchases and the duration of the purchase programme as conditions warranted.

Federal Reserve officials indicated that they were also prepared to purchase longer-term Treasury securities and expanding Fed’s $600 billion programme to buy home-finance debt.

The Federal Reserve is focussed on reducing a range of long-term borrowing costs to stem the longest recession since 1982. US policymakers, concluding a two-day meeting on Wednesday, left their target range for the main interest rate unchanged at close to zero and reiterated rates will be “exceptionally low” for “some time”.