The Federal Reserve on Wednesday pushed forward with plans to slowly wind down its stimulus but said it will likely need to keep rates low even after the economy regains its health given lasting scars from the financial crisis.

In announcing its view on future rates after a two-day policy meeting, the Fed also dropped a set of guideposts it was using to help the public anticipate when it would finally start bumping overnight borrowing costs up from zero.

It said, however, that dropping a 6.5 percent unemployment rate as a guideline in deciding when to raise rates does not represent a change in its policy intentions. The Fed said it would instead consider a wide range of economic indicators when deciding the future path of overnight rates.

The central bank noted in its statement that its embrace of easy money policies could continue even after the Fed achieves its goals of full employment and 2 percent inflation.

In a news conference Fed Chair Janet Yellen said Fed officials cited "the residual impacts of the financial crisis" for this, with some noting "the potential growth rate of the economy may be lower at least for a time."

Even so, the majority of Fed policymakers expect overnight interest rates to rise in 2015. That, coupled with uncertainty about changes in the Fed's forward guidance, pushed U.S. stock prices lower and U.S. government yields higher.

The unease in markets "might be a sign that people think Yellen will tighten sooner rather than later, or that inflation could come into the market if the Fed keeps rates low well past 6.5 percent (unemployment)," said Wayne Kaufman, chief market analyst at Rockwell Securities in New York.

The central bank proceeded with its well-telegraphed reductions to its massive bond-buying stimulus, announcing it would cut its monthly purchases of U.S. Treasuries and mortgage-backed securities to $55 billion from $65 billion.

Minneapolis Fed President Narayana Kocherlakota dissented, saying that dropping the unemployment threshold could hurt the credibility of the Fed's commitment to return inflation to 2 percent.

MEASURED WIND DOWN

The decision to continue to scale back its stimulus keeps the Fed on track for the measured wind down laid out by Yellen's predecessor, Ben Bernanke. The Fed repeated that it plans to continue trimming the asset purchases in "measured steps" as long as labor conditions continue to improve and inflation shows signs of rising back toward the Fed's 2-percent goal.

The Fed's assessment of the U.S. economy chalked up recent weakness partly to adverse weather.

The Fed had said since December 2012 that it would not consider raising short-term rates until the jobless rate dropped to at least 6.5 percent, as long as inflation looked set to remain contained.

But the unemployment rate has fallen faster than anticipated, in part because of discouraged job hunters giving up the search, and officials think the economy is still far from ready for higher borrowing costs.

Of the Fed's 16 policymakers, only one believes it will be appropriate to raise rates this year; 13 expect a first rate hike next year, and two others see the first rate hike coming in 2016, according to fresh forecasts published on Wednesday. But once rate hikes start, Fed officials see slightly sharper increases than they did in December, with rates ending 2015 at 1 percent and ending 2016 at 2.25 percent, according to the median of forecasts.

In December, Fed officials expected short-term rates to be just 1.75 percent by the end of 2016.

The new forecasts also show Fed officials see unemployment dropping slightly faster, to between 5.6 percent and 5.9 percent by the end of 2015. In December their forecasts called for unemployment falling to between 5.8 percent and 6.1 percent by the fourth quarter of 2015.

"The fact that that at the end of the day there are 10 billion fewer dollars in the market to provide artificially low rates, the market has to get accustomed to that new setting on the training wheels. And finally, consideration of macroeconomic data, the fact it has not significantly changed since December is a bit of a disappointment."



