WASHINGTON — The Federal Reserve Wednesday lowered its forecast for economic growth in 2011, while also lowering its expectation for the unemployment rate this year, as chairman Ben Bernanke warned the U.S. budget deficit is the “most important economic problem” the country faces.

Speaking in the first press conference for a Fed chairman following an interest rate decision, Bernanke touched on a range of issues from the disasters in Japan to gasoline prices to the Fed’s draw-down of its balance sheet. He said the central bank is expecting first-quarter gross domestic product to expand by less than 2%, noting that the root causes of the weakness are likely to be transitory factors like military spending and weaker exports.

The chairman reiterated the Fed’s plan to complete its Treasury purchase program at the end of June, while indicating future monetary policy decisions depend on resource utilization and inflation. The Fed will continue to reinvest maturing principal to keep steady the size of its balance sheet.

“I don’t know exactly how long before a tightening period begins,” Bernanke told reporters. The Fed’s language maintaining low interest rates “for an extended period” — in place since March 2009 — could remain for “a couple of meetings,” Bernanke said, but added that the Fed relies on “vaguer terminology” to stay flexible with its policies.

One of the Fed’s first steps to ease off monetary support will likely be to stop reinvesting all or part of the securities maturing on the Fed’s balance sheet. “That does constitute a policy tightening,” Bernanke said. A decision on reinvesting maturing principal will depend “on how stable the recovery is,” he said.

Bernanke cautioned that the surge in commodity prices, especially for gas, will not trigger the Fed to whisk away the punch bowl. “Medium-term inflation expectations have not moved very much,” he said, adding that “there is not very much the Fed can do about gas prices per se.”

The Fed’s GDP forecast for 2011 was revised lower to a range of 3.1% to 3.3% expansion, down from a 3.4% to 3.9% range estimated in January. Meanwhile, the Fed’s outlook for the unemployment situation brightened to a range between 8.4% to 8.7% in 2011, down from 8.8% to 9.0% in January.

Bernanke also called on Democrats and Republicans to bring down the federal deficit, which he said is the “most important economic problem at least in the longer-term that the U.S. faces.”

The deficit “is unsustainable” and “is a top priority” for lawmakers, he said. The federal budget cuts focused only on short-term spending could have consequences for GDP growth, Bernanke said.

The weaker GDP growth could have a limited impact on state and local governments, market participants said, while the initial stages of a monetary exit strategy for the Fed may indicate a return to normal for the municipal market.

“Slower growth does imply a slower growth in tax revenues, said Guy LeBas, at Janney Montgomery Scott LLC. But the states’ fiscal conditions rely more on executing spending cuts than on economic growth, he said.

Still, with the economy continuing to grow, the municipal market is “hinging back to fundamentals again,” said Dominick Mondi, senior managing director at Mesirow Financial Inc., speaking before the Fed statement.

The immediacy of crises in the Middle East and Japan has passed, Mondi said. Now, “we are still on the back end of the recovery for municipalities.” The improving economy coupled with state fiscal discipline constraints mean “there could be a light here at the end of the tunnel for credit improvement,” he said.

As the Fed prepares markets for a tighter monetary policy environment, munis “are attractive enough to absorb higher interest rates,” said Anthony Valeri of LPL Financial. The market still has “not recouped the damage,” but “is ready for a bigger load of issuance,” he said.

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