Fed sees Europe as potential threat to US recovery

WASHINGTON: The Federal Reserve is watching Europe's debt and banking problems to see if they worsen and cause knock-on damage to the US economic recovery, according to the minutes of the last policy-setting meeting.

At the December 14 meeting of the Federal Open Market Committee, participants viewed the US economy as sluggish despite a series of positive economic news since the prior meeting.

FOMC members said that the overall outlook was "a gradual pickup in growth with slow progress toward maximum employment," the minutes said.

"The recovery remained subject to some downside risks, such as the possibility of a more extended period of weak activity and lower prices in the housing sector and potential financial and economic spillovers if the banking and sovereign debt problems in Europe were to worsen."