WASHINGTON?? A few Federal Reserve officials in January believed another round of bond buying by the central bank would be needed before long to support the U.S. economy while others withheld judgment to await more data.
The few officials who believed more asset purchases could be warranted soon pointed to the prospect for continued high unemployment and a lack of inflation pressure, minutes of the Fed's Jan. 24-25 policy meeting released on Wednesday showed.
Others thought more bond buying would be necessary only if the recovery lost momentum or if inflation dipped, the minutes said.
"The decision to provide additional accommodation to the economic recovery remains a distinct possibly," said Millan Mulraine of TD Securities. "It underscored that the threshold for prompting further action remains relatively low."
All but one of the Fed officials felt that when the time comes for the central bank to reverse its ultra-loose monetary policy, bond sales should follow interest rate hikes. St. Louis Fed President James Bullard has said he thinks the central bank should start shrinking its expanded balance sheet before it starts raising rates.
At the close of its January meeting, the Fed said it would likely keep interest rates near zero until at least late 2014. Fed Chairman Ben Bernanke expressed caution about recent improvements in the economy and left the door open to further bond buying to boost growth.
The Fed also issued a statement of policy after that meeting saying it targets inflation of 2 percent. Governor Daniel Tarullo did not support that statement because he questioned whether it promoted better communication, the minutes showed.
Since then, data has continued to point to surprisingly robust economic growth. Employers added 243,000 jobs in January and the unemployment rate slipped to 8.3 percent.
The Fed cut rates to near zero in December 2008 and has bought $2.3 trillion in Treasuries and mortgage-related debt to lift the economy after a deep recession in 2007-2009.
Fed officials have expressed a wide spectrum of views since their last meeting about the appropriate course of policy. Some have called for further accommodation to stimulate stronger growth while others have pointed to signs of growing momentum and warned the central bank should not wait too long to tighten economic conditions.
There was little market reaction to the minutes. The euro extending losses versus the dollar due to the downside risks of GDP forecasts.
The minutes showed policy makers debating whether it was necessary to specify how long they thought interest rates should stay exceptionally low. While some thought showing individual policy makers' forecasts for the time of the first tightening and the pace of raising rates was sufficient, others thought it was important for the Fed's policy-setting panel to provide a formal decision on how long rates should stay very low.
Despite an improving economic outlook at the time of the Fed meeting, policy makers were somewhat gloomy about the prospects for a speedy recovery. They saw economic turmoil and slowing growth in Europe and the weak U.S. housing market, among other factors, as restrainting the pace of domestic economic growth.
Copyright 2012 Thomson Reuters. Click for restrictions.
Source: http://www.msnbc.msn.com/id/46401962/ns/business-stocks_and_economy/
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