U.S. Federal Reserve policy-makers last month discussed the importance of retaining the flexibility to increase or scale back their asset purchases if the economic outlook changed, the Fed said on Wednesday.
With respect to the large-scale asset purchase programs, some members thought that an increase in the maximum amount of the Committee's purchases of agency MBS (mortgage-backed securities) could help to reduce economic slack more quickly than in the baseline outlook, the Fed said in minutes of its September 22-23 meeting.
The Fed held interest rates near zero as expected after the meeting and opted to extend its mortgage debt buying campaign until the end of March 2010 from a previously announced close of December 31, 2009, while keeping the total size of the purchases the same at $1.45 trillion.
Policy-makers also raised predictions for growth over the next 18 months and said the balance of risks to their forecasts was balanced, but remained wary that the economy still remained fragile as it exited the worst recession in 70 years.
Under these circumstances, the Committee judged that the costs of growth turning out to be weaker than anticipated could be relatively high, the U.S. central bank said, referring to its rate-setting Federal Open Market Committee (FOMC).
The U.S. central bank is buying agency mortgage debt together with longer-dated U.S. government bonds as part of its efforts to stimulate activity, and made plain that this approach could be reopened if necessary.
Members discussed the importance of maintaining flexibility to expand the asset purchase programs should the economic outlook deteriorate or to scale back the programs should economic and financial conditions improve more than anticipated, the Fed said.
(Reporting by Alister Bull; Editing by James Dalgleish)