Fed minutes see new stimulus ‘before long’

Wednesday, 13 October 2010 21:38 -     - {{hitsCtrl.values.hits}}

WASHINGTON, (AFP) - The US Federal Reserve anticipates additional stimulus may be needed soon to prop up a slackening economic recovery, the minutes of its last policy-setting meeting revealed.

The minutes of the Federal Open Market Committee’s meeting on September 21 showed members generally agreed that such action would be swift if economic conditions warranted. The FOMC’s brief statement in September had said the central bank was prepared “to provide additional accommodation if needed” to support the recovery.

According to the minutes, participants had been briefed on mostly worsening conditions since the August 10 FOMC meeting and decided to signal the calvary could be on the way.

“Such an indication accorded with the members’ sense that such accommodation may be appropriate before long, but also made clear that any decisions would depend upon future information about the economic situation and outlook,” the minutes said.

That signal fired up expectations the Fed will soon pump money again into the economy through major asset purchases, a measure known as quantitative easing (QE).

The Fed tipoff has helped drive stock and bond markets sharply higher and weakened the dollar as traders contemplated a new round dubbed QE2. Many observers say a QE2 announcement could come as soon as November 3, at the conclusion of a two-day FOMC meeting.

“Given, the absence of major improvements in the economy since the September 21 FOMC meeting and in light of the weak September payroll and unemployment data, we believe the FOMC will undertake further monetary policy accommodation during its November meeting,” said Gregory Daco at IHS Global Insight.