The Federal Reserve is increasingly concerned with stalling economic growth and the prospect of deflation.

Minutes from the Fed’s October meetings, at which the central bank lowered interest rates by a half percentage point, reveal Fed Chairman Ben Bernanke and his colleagues don’t expect the economy to recover until mid-2009.

The minutes were seen by many economists as a hint of more interest rate cuts or further interventions.

“By removing inflation from the list of major risks to the outlook, and instead highlighting deflation as a new risk, the Fed is essentially giving itself carte blanche to move ahead full bore using all tools and facilities at its disposal,” IHS Global Insight Chief U.S. Financial Economist Brian Bethune wrote in a research note.

The report also comments on the widespread uncertainty related to the government’s tremendous expansion of monetary and fiscal policy.

According to the minutes, “the specifics and effectiveness of some government programs to support financial markets and institutions remained unclear.”

The uncertainty tied to, in particular, the $700 billion rescue plan approved in early October, could dampen investors’ -- as well as consumers’ -- expectations, which could further depress economic growth, the minutes said.

The Fed is also worried about deflation, which is a rapid drop in price levels.

According to the Fed minutes, the risk exists “that over time inflation could fall below levels consistent with the Federal Reserve’s dual objectives of price stability and maximum employment.”

Deflation “would pose important policy challenges in light of the already-low level of the Committee’s federal funds rate target.”

Data released Wednesday by the Labor Department showed that consumer prices plunged 1% last month -- the biggest dip ever.

Private economists also share the Fed’s fears.

“The pace at which inflation has come off has been strikingly quick,” JPMorgan economist Michael Feroli said in a research note. “While it may be over-hasty to call for the Great Deflation of 2009, the specter of falling prices is probably gaining increasing prominence in the thoughts of Fed policymakers.”