Some Fed officials sought more economic stimulus

Some Federal Reserve officials pushed in August for a more aggressive response to the economy’s slowdown. They settled for a pledge to keep rates super-low for two more years and agreed to consider additional options at an extended meeting in September. Minutes of the Aug. 9 discussions released today show that Fed officials discussed a range of actions, including another round of Treasury bond purchases. 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; the extension 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. The minutes show Fed officials discussed the two-year pledge to keep interest rates near zero, a third round of bond purchases, and shifting the mix of the Fed’s holdings into long-term Treasury securities. Some members also raised the idea of tying the pledge to keep interest rates low to a level of unemployment or inflation, instead of declaring a 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% rally in the Dow through April 29.