Details of minutes from August 9 meeting show some favoured far bolder action including another round of asset purchases or alt145 QE3alt39
Some Federal Reserve officials pushed in August for a more aggress
ive response to the US economys slowdown.
They settled for a pledge to keep rates superlow for two more years and agreed to consider additional options at an extended meeting in September.
Minutes, or meeting records, of the August 9 discussions show that Fed officials discussed a range of actions, including a third round of asset purchases, or ” quantitative easing”. The meeting was contentious, with three out of 10 voting officials disagreeing with chairman Ben Bernankes decision to announce he plans to keep rates close to zero for another two years.
” A few members felt that recent economic developments justified a more substantial move,” according to Federal Open Market Committee meeting minutes.
” Participants noted a deterioration in labour market conditions, slower household spending, a in consumer and business confidence and continued weakness in the housing sector.” Some Fed officials said a weaker economy called for such a step. Fed officials in the end opted to keep rates low until at least mid- 2013.
They also added a second day to their September meeting. That raised speculation that the Fed would announce some further action after that meeting.
Three Fed members opposed any steps for fear they could ignite inflation.
The 7- 3 vote after the meeting marked the first time in nearly 20 years that at least three members dissented from a Fed statement.
Stocks rose modestly after the minutes were released.
The Dow Jones industrial average gained more than 30 points.
Some members also raised the idea of tying the pledge to keep interest rates low to a level of unemployment or inflation, instead of the set time period. The bond purchases are intended to keep long- term rates low and aid the economy.
The second round of bond purchases, announced last year, sparked a 28 percent rally in the Dow through April 29. Charles Evans, the president of the Federal Reserve Bank of Chicago, said today that he was one of the Fed officials who favored more aggressive policy actions.
Speaking at Jackson Hole in Wyoming last Friday, Bernanke said the Fed was considering other options to support the economy. He stopped short of providing details, but said the Fed would meet for two days in September instead of one as originally planned.