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Fed leaders inclined toward new action, wanted more time to decide how

By Neil Irwin
Many Federal Reserve officials were inclined toward new action to boost the economy at their last meeting three weeks ago. But they thought it best to gather more information about the state of the economy and better analyze what form any new action should take before moving forward, according to minutes of the meeting.

The minutes of the Sept. 21 Federal Open Market Committee policy meeting, released Tuesday, reveal a panel that has significant divisions but that also appears supportive of new steps to try to strengthen a faltering economy and increase inflation above its current rock-bottom levels.

The policy statement the officials issued the day of the meeting said that they would be prepared to provide "additional accommodation" to support the economy if necessary. That statement, the minutes released Tuesday said, "accorded with the members' sense" that such accommodation would be needed before long, "but also made clear that any decisions would depend upon future information about the economic situation and outlook."

Indeed, there was a clear sense that the policymakers needed more data about how the economy was evolving, and more time to evaluate specific policy options, before pulling the trigger on any new monetary easing.

"In light of the considerable uncertainty about the current trajectory for the economy, some members saw merit in accumulating further information about reaching a decision about providing additional monetary stimulus," according to the minutes. "In addition, members wanted to consider further the most effective framework for calibrating and communicating any additional steps to provide such stimulus."

The discussion focused on the strategy of purchasing government debt, or Treasury securities, to boost growth. Fed officials could decide to buy hundreds of billions of dollars of bonds with newly created money at their next policy meeting, Nov 2-3.

Officials also considered "possible steps to affect inflation expectations," the minutes said.

If consumers began expecting that inflation would rise, they would have greater incentive to spend money now, lest it become less valuable as time goes on. That could in turn quickly spark economic growth.

Some Fed officials are apparently considering more unconventional ways to boost inflation expectations, such as "providing more detailed information about the rates of inflation the Committee considered consistent with a dual mandate, targeting a path for the price level rather than the rate of inflation, and targeting a path for the level of nominal GDP."

As for the economy overall, Fed officials did not predict a return to recession, but they hardly seemed confident about the outlook.

"A number of participants observed that the sluggish pace of growth and continued high levels of slack left the economy exposed to potential negative shocks," although they judged the economic recovery to remain underway and "generally expected growth to pick up gradually next year."

By Neil  | October 12, 2010; 2:58 PM ET
Categories:  Federal Reserve  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Economic agenda: Tuesday, Oct. 12, 2010
Next: Florida attorney general: Moratorium may be 'counterproductive'

Comments

“Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked: Account overdrawn.” Ayn Rand, Atlas Shrugged

Posted by: Anonymous | October 12, 2010 3:26 PM | Report abuse

The surest way to destroy a society is to debauch its currency. V. Lenin.

Posted by: Anonymous | October 12, 2010 3:31 PM | Report abuse

October surprise on the way!

Chicagoans know how to win elections -- they buy them.

Posted by: Anonymous | October 12, 2010 3:35 PM | Report abuse

Ayn Rand was a fool. Her entire philosophy rests on the notion that men act in their own rational self-interest.

While men do act in their own self-interest (almost) all of the time, they NEVER do so rationally

Posted by: Anonymous | October 12, 2010 3:40 PM | Report abuse

Here's what the Fed should do:

FIRE BERNAKE AND DISBAND!

Put the country back the way it was BEFORE the Federal Reserve came into existence.

Posted by: Anonymous | October 12, 2010 3:41 PM | Report abuse

The GOP doubled the national debt from $5 trillion to $10 Trillion, and turned a budget surplus into a $1.4 trillion deficit. You want to know who put us in this mess, look in the mirror. Stop blaming Obama just because he got elected captain of a sinking ship

Posted by: Anonymous | October 12, 2010 3:42 PM | Report abuse

How come the Gallup measure of unemployment came in lower than the government's for August but higher than the government's for September? Shouldn't it track consistently above or below the government's measure?

Posted by: blasmaic | October 12, 2010 3:42 PM | Report abuse

Bernanke and Yellen won't stop until they have destroyed the wealth of depositors, retirees, savers, pension funds, $200/bbl oil,$2000 gold, food riots and over seen the destruction of more jobs through cheap money mergers.

The federal reserve is out of control and if anyone thinks cheap money is the only solution you are no more that part of the deadbeat, debtor, banking, wall street and political mob bent festing on the bodies of savers.

Posted by: Anonymous | October 12, 2010 5:01 PM | Report abuse

This is a complete circle jerk

Posted by: Anonymous | October 12, 2010 5:54 PM | Report abuse

Ayn Rand was a fool. Her entire philosophy rests on the notion that men act in their own rational self-interest.

While men do act in their own self-interest (almost) all of the time, they NEVER do so rationally
---------------------------
It's called "Praexology" ... and has nothing to do with "rationality" -- and it wasn't Rand's idea -- she stole it from Ludwig Von Mises ...

Posted by: Anonymous | October 12, 2010 7:10 PM | Report abuse

is this the third or fourth or fifth time billions have been spent on buying troubled assets...
just how much are they giving away to their liberal masters...

Posted by: DwightCollins | October 12, 2010 7:45 PM | Report abuse

Should the tea partiers gain much of a foothold in Congress, perhaps after they repeal the civil rights legislation of the 1960s, they'll turn their attention to the Federal Reserve Act.

Posted by: jaallenj | October 14, 2010 12:57 PM | Report abuse

power, authority, & responsibility..

Posted by: Anonymous | October 16, 2010 7:49 AM | Report abuse

"further and quick responsibility action for really immediate matters", by the search and rescue department.

Posted by: andrebudianto | October 16, 2010 7:55 AM | Report abuse

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