Federal Reserve Chairman Ben Bernanke and his colleagues discussed options for stimulating the U.S. economy at their latest meeting, three weeks ago.
A third round of large bond purchases known as quantitative easing -- or QE3 -- is still on the table, as is a plan to lay out more explicit guidelines for Fed policy going forward.
While the Fed's policy-making committee discussed both options in detail, the minutes show that several members expressed concerns about QE3. Some fear that buying more Treasuries or mortgage-backed securities could distort the bond market, while others worried that additional purchases could "increase the risks to financial stability or lead to a rise in long-term inflation expectations."
But when it comes to using clearer communications as a tool, the minutes show far less dissension.
The Federal Reserve has recently said it is likely to hold interest rates near "exceptionally low levels" at least through late 2014, but at the August meeting, some Fed officials noted that they would like to extend that date out further.
This guidance in itself is thought to be an effective tool for stimulating the economy, since it leads investors to expect low returns on safe-haven assets and encourages investment in riskier assets like stocks.
Some Fed officials noted however, that the tool might be more effective if it was combined with clearer guidelines. For example, policymakers could lay out specific economic conditions that would push them to raise interest rates in the future.
A few months ago, several Fed members were only in favor of additional stimulus if the economic recovery deteriorated.
Now, it seems many are in favor of additional easing, as long as conditions remain the same.
"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," the minutes said.
Fed members also discussed lowering the rate on excess reserves or exploring a program like the Bank of England's Funding for Lending Scheme, but from the minutes, it doesn't seem either of those measures gained widespread support within the committee.
Chairman Ben Bernanke may offer more hints about the Fed's next move in a speech at Jackson Hole, Wyo. next week. The Fed's next meeting is scheduled to conclude September 13.
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