The nation’s unemployment rate will go to 10.1% this year and remain near 10% through next year, the Federal Reserve forecast in its most recent outlook for the economy, offered at the Federal Open Market Committee’s June 23-24 meeting.

The forecast -- which also showed gross domestic product not contracting as much as previous forecasts -- corroborated concerns about a “jobless recovery.”

In April, when it issued its last forecast, the “central tendency” forecast of the Federal Reserve Governors and Presidents of the 12 Federal Reserve Banks, anticipated the unemployment rate rising to 9.6%.

The “central tendency” captures the mid-range of individual forecasts by eliminating the three highest and three lowest projections in each category: change in GDP, unemployment rate, all-item inflation and “core inflation.

According to the minutes of the June 23-24 meeting, the wider range of forecasts saw the unemployment rate soaring to 10.5% this year, up from the highest projection of 10.0% forecast in April.

“FOMC participants generally expected that, after declining over the first half of this year, output would expand sluggishly over the remainder of the year,” the minutes said. “All FOMC participants projected that real gross domestic product [GDP] would contract over the entirety of this year and that the unemployment rate would increase in coming quarters.”

The FOMC was only marginally more optimistic about 2010 with “central tendency” projections topping at 3.3% growth rate for GDP, barely above the historic growth rate.

“Even though all participants had raised their near-term outlook for real GDP, in light of incoming data on labor markets,” the minutes said “they increased their projections for the path of the unemployment rate from those published in April. Participants foresaw only a gradual improvement in labor market conditions in 2010 and 2011, leaving the unemployment rate at the end of 2011 well above the level they viewed as its longer-run sustainable rate.”

The minutes underscore a dilemma for the Federal Reserve which operates under dual legislative mandate of price stability [inflation] and maximum sustainable economic growth, generally considered to be determined by the unemployment rate.

The projections were the centerpiece of the minutes for the meeting at which the FOMC made no change in interest rates or in its planned purchase of mortgage backed and other securities. The purchase program is part of the effort to tame interest rates. The target Fed Funds rate has been at 0 to 0.25% since December.

According to the minutes, the FOMC discussed an exit strategy for “terminations of various liquidity programs,” noting “a number of the credit and liquidity facilities that the Federal Reserve had established in the course of the financial crisis were scheduled to expire on October 30.” The minutes noted “use of most of the liquidity facilities had declined in recent months as market conditions had improved,” but, the minutes said, meeting participants judged “market conditions remained fragile.”

Participants, according to the minutes, said the facilities were contributed to the reduction in financial strains.

“If the Federal Reserve’s backup liquidity facilities were terminated prematurely,” the minutes said such developments might put renewed pressure on some financial institutions and markets and tighten credit conditions for businesses and households.”

The forecasts and the discussion of the wind-down of the FOMC’s security purchase program were the centerpiece of the minutes issued Wednesday which notably did not include any reference to the Obama Administration’s proposals to enhance the role of the Federal Reserve as part of an overhaul to financial regulation. The Administration’s proposal would give the Federal Reserve broader powers to regulate the financial sector of the economy – including companies only peripherally attached to that sector – while at the same time carving out consumer protection into a new agency. The Federal Reserve currently has some consumer protection responsibilities. The Federal Reserve has balked at some of the changes which would give the Government Accounting Office additional audit powers over the FOMC.

In its discussion of the economy, according to the minutes, FOMC participants generally agreed “the economic contraction was slowing and that the decline in activity could cease before long.” Meeting participants said both business and household confidence had improved and cited survey data and anecdotal reports showing “improved expectations for the future.” They said too the “inventory adjustment process was continuing, housing and consumption demand apparently had leveled off, and financial market strains had eased further.”

The participants, according to the minutes “saw the economy as still quite weak and vulnerable to further adverse shocks.”

The FOMC’s next meeting is scheduled for August 11-12.