At first glance the minutes of the last meeting of the US Federal Reserve´s Open Market Committee – which is akin to the Bank of England´s monetary policy committee – seem to show that Fed Chairman Ben Bernanke and his colleagues may have been notably more worried than was thought when they last met to decide on interest rates.
So much so that a third round of quantitative easing now seems to be an even more distinct and clear possibility, although it is not yet guaranteed. In this regard, anxiety levels in markets have come down by a notch or two since that meeting.
Thus, on the one hand the monetary authority indicates that: ‘the staff’s medium-term forecast for real GDP growth was little changed (…)’, but then goes on to state – with a view apparently more to the very short-term – that: ‘members generally attached an unusually high level of uncertainty to their assessments of the economic outlook and continued to judge that the risks to economic growth were tilted to the downside because of strains in financial markets stemming from the sovereign debt and banking situation in Europe as well as the potential for a significant slowdown in global economic growth and for a sharper-than-anticipated fiscal contraction in the United States.’
And here´s the interesting part
For that reason: ‘Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.’
Nevertheless, ‘several members noted the benefits of accumulating further information that could help clarify the contours of the outlook for economic activity and inflation as well as the need for further policy action.’
As well, ‘one member judged that additional accommodation would likely not be effective in improving the economic outlook and viewed the potential costs associated with such action as unacceptably high.’
At the conclusion of the discussion, members agreed that they would closely monitor economic and financial developments and carefully weigh the potential benefits and costs of various tools in assessing whether additional policy action would be warranted, the minutes read.
Tags: anxiety levels | ben bernanke | contours | economic recovery | gdp growth | global economic growth | minutes of the last meeting | monetary policy committee | open market committee | sovereign debt