The Federal Reserve felt at its December meeting that the U.S. economy still needed help despite signs of strength, according to minutes released on Tuesday that showed little appetite to trim bond-buying plans.
Some Fed officials indicated a fairly high threshold for reconsidering the $600 billion in purchases first announced back in November, while others thought more time was needed before any such re-evaluation.
The rather dovish tone of the minutes suggested anyone thinking the central bank might curtail its controversial bond-buying plans, known in the markets as the second round of quantitative easing or QE2, may be getting ahead of themselves.
There is no indication that members are inclined to curtail the program, said Eric Green, chief economist at TD Securities. The Fed will follow through with the $600 billion.
Indeed, the December 14 meeting minutes noted that members generally felt that the change in the outlook was not sufficient to warrant any adjustments to the asset-purchase program.
Wall Street economists have been busy revising up their forecasts for economic growth in recent weeks on data showing business activity and consumer spending picking up steam.
But the Fed's policy-setting panel was much less sanguine.
The U.S. economy, having emerged from its deepest recession in generations in the summer of 2009, has since expanded in fits and starts. Gross domestic product rose at a 2.6 percent annual rate in the third quarter, a pace still seen as too low to bring down the country's 9.8 percent jobless rate.
The minutes did suggest the central bank is counting on a short-term boost to the economy from the recent tax cut deal between President Barack Obama and Republicans in Congress.
However, they also showed policymakers are also still worried about risks to growth, including anemic hiring and a battered housing sector, which has been flirting with a renewed slump.
Even with the positive news received over the intermeeting period, the most likely outcome was a gradual pickup in growth with slow progress toward maximum employment, the minutes said.
The recovery (remains) subject to some downside risks, they added, citing housing and debt troubles in Europe as potential trouble spots.
The Fed noted that while consumer spending had picked up, much of it was concentrated among richer Americans.
There were indications that retail spending by middle- and lower-income households had risen less than spending by high-income households, suggestive of ongoing financial pressures on those of more modest means, the minutes said.
Meeting participants generally thought inflation would remain below levels consistent with the Fed's mandate for some time.
The minutes said Fed staff had revised up their near-term forecasts but did not believe growth prospects were any firmer over a longer horizon.