Fed mulls stimulus if outlook worsens appreciably

The outlook for the U.S. economy would have to deteriorate "appreciably" to spur fresh support from the Federal Reserve, minutes of the central bank's last policy meeting released on Tuesday said.

"The committee would need to consider steps it could take to provide additional policy stimulus if the outlook were to weaken appreciably further," the minutes of the Fed's August 10 policy session said.

At that meeting, officials agreed to reinvest maturing mortgage-related securities in longer-term U.S. government debt to hold the Fed's balance steady at about $2 trillion and keep in place supports for the stumbling economic recovery.

While the minutes showed the current preference was to buy Treasury debt, officials left the door open to other options.

"While reinvesting in Treasury securities was seen as preferable given current market conditions, reinvesting in MBS (mortgage-backed securities) might become desirable if conditions were to change," the minutes said.

The Fed stopped buying MBS and mortgage-agency debt at the end of March after it had accumulated about $1.4 trillion worth. It also bought $300 billion in longer-term Treasury securities as part of a program to spur recovery.

The buying spree came after the U.S. central bank had chopped benchmark borrowing costs to near zero in December 2008, leading policy-makers to cast about for additional ways to stimulate the economy.

Financial markets were little changed after the release of the minutes, with the dollar holding earlier declines against the Japanese yen and the euro, and with prices for U.S. Treasury easing slightly.

[Fuente: By Mark Felsenthal and Glenn Somerville, Reuters, Washington, 31Aug10]

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