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The Federal Reserve Wednesday sharply lowered its projections for the economy this year and into 2009, and signaled that additional interest rate reductions may be needed to help ease the country’s ongoing financial crisis, the Associated Press reported.

Facing the likelihood of future “significant weakness” in the economy, some Fed officials suggested that “additional policy easing could well be appropriate at future meetings,” according to the minutes of the Fed’s Oct. 28-29 meeting, released Wednesday.

And with the economy forecast to continue to stall, unemployment is likely to rise higher, the Fed predicted. Unemployment rose to 6.5% last month.

The Fed last month lowered the key U.S. interest rate to 1%, a level seen only once before in the last half-century, and many economists predict the Fed will lower rates again at its last meeting of the year on Dec. 16, to help brace the sinking economy, AP reported.

The Fed minutes showed that officials were concerned that the effectiveness of previous rate cuts “may have been diminished by the financial dislocations, suggesting that further policy action might have limited efficacy in promoting a recovery in economic growth.”