Fed leaves door open on QE3

@CNNMoney October 12, 2011: 2:56 PM ET

NEW YORK (CNNMoney) -- Federal Reserve policymakers left the door open to another round of asset purchases in the near future, according to minutes of their most recent meeting.

At the two-day meeting that concluded Sept. 21, the Fed unveiled plans to sell short-term Treasuries and buy longer-term debt, a move popularly known as "Operation Twist," in an effort to drive down interest rates without pumping additional money into the economy.

But the minutes released Wednesday showed that the possibility of a third round of asset purchases, known as quantitative easing or QE3, is still very much alive.

"A number of participants saw large-scale asset purchases as potentially a more potent tool that should be retained as an option in the event that further policy action to support a stronger economic recovery was warranted," the Fed minutes said.

Two of the policymakers believed that "current conditions and the outlook could justify stronger policy action," but they were willing to settle for Operation Twist because it did not preclude further action in the future.

Three members of the Fed -- Dallas Fed President Richard Fisher, Minneapolis Fed President Narayana Kocherlakota and Philadelphia Fed President Charles Plosser -- voted against the move, arguing that no further action to try to stimulate the economy was called for at the time of the meeting. Their dissent was made public at the conclusion of the meeting.

The Fed members agreed that economic growth remained slow but did not suggest the economy had entered a new recession. But fears of a new recession are growing among economists outside the Fed.

The day after the Fed unveiled Operation Twist, the yield on the 10-year Treasury fell to a record low of 1.695%. But yields have crept back up since then, even as the Fed has bought more of long-term bonds, reaching 2.24% in trading Wednesday following the release of the minutes.

Experts say the rise in yields is because fears are easing about a new recession after a better-than-expected September jobs report and hopes for a resolution to the European sovereign debt crisis.

The Fed's next meeting is set for Nov. 1 and 2.  To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed4.01%4.03%
15 yr fixed3.12%2.97%
5/1 ARM3.11%2.99%
30 yr refi4.04%4.09%
15 yr refi3.15%3.05%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Economic Calendar
Latest ReportNext Update
Home pricesAug 28
Consumer confidenceAug 28
GDPAug 29
Manufacturing (ISM)Sept 4
JobsSept 7
Inflation (CPI)Sept 14
Retail sales Sept 14
CNNMoney Sponsors

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.