WASHINGTON (AP) — 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 superlow for two more years and agreed to consider additional options at an extended meeting in September.
Minutes of the Aug. 9 discussions 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. That 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 bond purchases are intended to keep long-term rates low and aid the economy. The second round, announced last year, sparked a 28 percent rally in the Dow Jones Industrial Average through April 29.
Investors previously hoped that Fed Chairman Ben S. Bernanke would provide details of the Fed’s next moves during a highly anticipated speech in Jackson Hole, Wyo., but Mr. Bernanke offered no new steps. He did say the central bank would extend its September meeting to two days to allow for a fuller discussion. On Tuesday, the minutes show that the board had pushed for the longer meeting.
A turbulent summer has fueled fears that the U.S. is on the verge of another recession.
The economy grew at an annual rate of just 0.7 percent in the first six months of this year, the weakest performance since the recession ended two years ago. Europe’s debt crisis has intensified. U.S. lawmakers fought over increasing the nation’s debt limit and only agreed to do so hours before a potential default. That delay prompted Standard & Poor’s to lower its rating on U.S. long-term debt for the first time in history.
Stocks plunged in late July and early August. The Dow has lost nearly 11 percent of its value since July 21.
A handful of reports showed that growth picked up at the start of July-September quarter. In July, consumers spending rose by the most in five months, the economy created twice the number of jobs as in each of the previous two months, and a rebound in the auto sector drove factory production up by the most since Japan’s earthquake-tsunami crisis.
Still, consumer confidence in the economy plunged in August to a two-year low, according to a report Tuesday from the Conference Board. The downgrade in U.S. debt and the stock market plunge likely contributed to the decline.
A key question for the economy is whether consumers and business will continue to pull back
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