The Federal Reserve declined to provide more stimulus after its last meeting, but minutes released Wednesday show more members of the Federal Open Market Committee lowered their outlook for the economy.
“While most members did not view the medium-run economic outlook as having changed significantly since the June meeting, several noted that they had lowered their expectations for economic growth over coming quarters,” according to the FOMC minutes.
Members did discuss what more could be done through a potential third round of quantitative easing, including the purchase of more Treasury securities and agency mortgage bonds.
And some stiumulus could arrive soon.
“Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a sub- stantial and sustainable strengthening in the pace of the economic recovery,” according to the minutes.
Analysis showed “substantial capacity for additional purchases without disrupting market functioning.”
Unemployment went unchanged in July at roughly 8.3%. Committee members noted housing was showing some improvements as sales increased, but they remained concerned about a heavy supply of homes either in foreclosure on the verge of it.
A recent survey of loan officers showed mortgage credit remains tight, barely easing from post-crisis highs.
Another round of stimulus remains “a coin flip” to some banking analysts. The Fed extended its Operation Twist at the previous meeting through the end of 2014, and members expect unemployment to recover above the minimum level by then without further action.
But some members displayed “an unusually high level of uncertainty to their assessments of the economic outlook,” according to the minutes.
Sovereign debt struggles in Europe still posed worries, and members raised concerns over a “sharper-than-anticipated fiscal contraction” in the U.S.
“A number of members noted that if the recent modest rate of economic growth were to persist, the economy would be less able to weather a material adverse shock without slipping back into recession,” according to the minutes.
jprior@housingwire.com
