[h=3]By KRISTINA PETERSON And MICHAEL R. CRITTENDEN[/h]The Federal Reserve sent another strong signal that it is preparing new steps to boost the recovery, saying that stimulus would be needed fairly soon unless the economy shows substantially stronger growth, according to minutes of the Fed's last meeting released Wednesday.
"Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery," according to minutes from the July 31-Aug. 1 Federal Open Market Committee meeting, released after the customary three-week lag.
The statement suggested growing support within the central bank for action. At their previous meeting in June, only "a few members" thought further stimulus would likely be needed. The caveat that a substantial and sustainable pickup in growth could forestall action suggested that the Fed has set a high bar to holding off. Some recent economic data have picked up, but few economists have described the improvements as substantial.
Since their June meeting, Fed officials agreed that data pointed to a recent deceleration of economic activity and considerably slower consumer spending, compared to earlier in the year.
Most policymakers agreed that "economic growth was likely to remain moderate over coming quarters and then pick up gradually" and that the unemployment rate would decline only slowly.
Discussing their options for boosting the recovery, more Fed officials seemed to think the benefits of launching another major bond-buying program outweighed the potential costs.
"Many participants expected that such a program could provide additional support for the economic recovery both by putting downward pressure on longer-term interest rates and by contributing to easier financial conditions more broadly," the minutes stated. Some Fed officials also thought another bond-buying program, often referred to as quantitative easing, might boost business and consumer confidence.
However, other Fed officials worried how effective such a program would be and if it might make it more difficult for the central bank to unwind its large portfolio of assets down the road. Many Fed officials thought it was important for any future program to be flexible, to account for changes in the economy.
Fed officials also explored other policy tools they could use to help the recovery, including extending their guidance on how long they intend to keep short-term interest rates near zero. The Fed has said since January that it plans to keep short-term rates at "exceptionally low levels" at least through late-2014.
Other options discussed at the last meeting included lowering the interest the Fed pays banks on the required and excess reserves they keep parked at the central bank. "A couple" of Fed officials also expressed interest in a Bank of England funding for lending scheme aimed at clearing a logjam in the credit supply.
At the FOMC's July 31-Aug. 1 meeting, 11 out of 12 Fed officials voted to keep the central bank's easy-money policies in place. The central bank officials suggested more strongly they were closer to taking new steps to boost the economy, but held back from immediately starting a new round of bond buying or taking other actions.
The next major clue to the Fed's latest thoughts will likely be Chairman Ben Bernanke's Aug. 31 speech in Jackson Hole, Wyo.
The Fed's next policy meeting will take place Sept. 12-13.
"Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery," according to minutes from the July 31-Aug. 1 Federal Open Market Committee meeting, released after the customary three-week lag.
The statement suggested growing support within the central bank for action. At their previous meeting in June, only "a few members" thought further stimulus would likely be needed. The caveat that a substantial and sustainable pickup in growth could forestall action suggested that the Fed has set a high bar to holding off. Some recent economic data have picked up, but few economists have described the improvements as substantial.
Since their June meeting, Fed officials agreed that data pointed to a recent deceleration of economic activity and considerably slower consumer spending, compared to earlier in the year.
Most policymakers agreed that "economic growth was likely to remain moderate over coming quarters and then pick up gradually" and that the unemployment rate would decline only slowly.
Discussing their options for boosting the recovery, more Fed officials seemed to think the benefits of launching another major bond-buying program outweighed the potential costs.
"Many participants expected that such a program could provide additional support for the economic recovery both by putting downward pressure on longer-term interest rates and by contributing to easier financial conditions more broadly," the minutes stated. Some Fed officials also thought another bond-buying program, often referred to as quantitative easing, might boost business and consumer confidence.
However, other Fed officials worried how effective such a program would be and if it might make it more difficult for the central bank to unwind its large portfolio of assets down the road. Many Fed officials thought it was important for any future program to be flexible, to account for changes in the economy.
Fed officials also explored other policy tools they could use to help the recovery, including extending their guidance on how long they intend to keep short-term interest rates near zero. The Fed has said since January that it plans to keep short-term rates at "exceptionally low levels" at least through late-2014.
Other options discussed at the last meeting included lowering the interest the Fed pays banks on the required and excess reserves they keep parked at the central bank. "A couple" of Fed officials also expressed interest in a Bank of England funding for lending scheme aimed at clearing a logjam in the credit supply.
At the FOMC's July 31-Aug. 1 meeting, 11 out of 12 Fed officials voted to keep the central bank's easy-money policies in place. The central bank officials suggested more strongly they were closer to taking new steps to boost the economy, but held back from immediately starting a new round of bond buying or taking other actions.
The next major clue to the Fed's latest thoughts will likely be Chairman Ben Bernanke's Aug. 31 speech in Jackson Hole, Wyo.
The Fed's next policy meeting will take place Sept. 12-13.