WASHINGTON (Reuters) - Federal Reserve officials believed in September the struggling recovery might soon need more help, and they discussed several ways to provide support, including the possible adoption of a price-level target.
Policy-makers had a “sense that (more) accommodation may be appropriate before long,” the central bank said on Tuesday.
In minutes of the its last policy-setting session held September 21, the Fed said officials discussed several approaches to aiding the economy but focused on buying additional longer-term Treasury securities and ways to nudge the public into expecting higher levels of inflation in the future.
On Wall Street, stocks trimmed their losses, with both the Dow Jones industrial average and the Standard & Poor’s 500 Index briefly turning higher after the FOMC’s minutes came out.
To help shift inflation expectations, policy-makers debated providing more detailed information about what rates of inflation they would prefer, or the possibility of making clear they would tolerate a higher level of inflation on a temporary basis, a policy approach known as price-level targeting.
They also discussed the possibility of targeting a path for GDP growth.
The Fed has kept overnight interest rates near zero since December 2008 and has bought about $1.7 trillion in mortgage-linked securities and longer-term government debt to lower other borrowing costs to help the economy recover from the worst recession since the 1930s.
As the recovery showed signs of fading over the summer, sapped by the drying up of government stimulus measures and the shock of a sovereign debt crisis in Europe, Fed officials said they would consider additional stimulus measures to support the sluggish economy.
The September meeting’s minutes showed a number of Fed officials were close to pulling the trigger.
“Many members considered the recent and anticipated progress toward meeting the committee’s mandate of maximum employment and price stability to be unsatisfactory,” the Fed said.
Several officials felt that unless conditions improved, they would consider it appropriate to take action soon in hopes of spurring a stronger recovery.
Reporting by Mark Felsenthal and Jason Lange; Editing by Jan Paschal