Washington - The US Federal Reserve Wednesday sharply cut its growth forecast for 2008 but suggested it may halt a string of drastic rate cuts aimed at boosting the sagging US economy.

The central bank predicted 2008 growth of 0.3 per cent to 1.2 per cent, down from a January projection of 1.3 per cent to 2 per cent, according to the minutes of the Federal Open Market Committee's April 30 meeting.

The Fed cut its benchmark interest rate by 0.25 percentage points to 2 per cent at the April meeting, but the minutes indicate that inflation risks made it a difficult decision.

Consumer prices were projected to increase by 3.1 to 3.4 per cent in 2008, up from 2.1 to 2.4 per cent inflation expected in the Fed's January forecast.

"Most members viewed the decision to reduce interest rates at this meeting as a close call," the Fed minutes said. "Although downside risks to growth remained, members were also concerned about the upside risks to the inflation outlook."

Two of the board's 10 members voted against April's rate cut.

The economy expanded by 0.6 per cent in the first quarter according to initial government estimates. Some economists believe the US has entered a recession.

The Fed's federal funds rate has been cut from 5.25 per cent to 2 per cent since September to combat a housing and mortgage crisis that has engulfed the world's largest economy. (dpa)