(RTTNews) - The minutes of the Federal Open Market Committee released Wednesday revealed some debate within the policymaking arm of the Federal Reserve over whether or not to purchase additional treasury securities. Although the final decision was to stick with the $300 billion agreed on at the March meeting, in late April some officials thought that purchasing more could spur recovery.

After some debate, officials agreed that such a purchase was not warranted at that time.

“Some members noted that a further increase in the total amount of purchases might well be warranted at some point,” the minutes of the April 28-29 meeting read.

However, “all members concurred with waiting to see how the economy and financial conditions respond to the policy actions already in train” before making such a decision, they continued.

Additional purchase may be necessary “at some point to spur a more rapid pace of recovery,” the minutes read. At its March meeting the FOMC had taken the drastic measure of deciding to purchase up to $300 billion in longer-term treasury securities. At the April meeting they clarified that the purchase will be made by autumn.

In addition, the Fed reiterated its plans to purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year.

At the April meeting the FOMC voted unanimously to keep the target range between 0 and 0.25 percent. In the accompanying statement the FOMC noted that “the economy has continued to contract, though the pace of contraction appears to be somewhat slower.”

“Although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time,” the statement read.

Once again, the FOMC said that interest rates will remain exceptionally low for some time, adding that they will “employ all available tools to promote economic recovery and to preserve price stability.”

The minutes revealed that while Fed governors foresaw a deeper recession than initially projected, they were also cautiously optimistic that the severely battered economy was beginning to stabilize.

“Improvement in business activity is not far off,” Minneapolis Fed President Gary Stern said Tuesday. “Interest rates are low and financial conditions are improving.The improvement is gradually becoming more broadly based.”

However, last week Dallas Federal Reserve Bank Branch President Richard Fisher warned that positive growth will not likely resume until 2010. In a speech before the Texas Bankers Association, Fisher said that Fed actions have “succeeded in pulling the financial markets and the economy from the edge of the abyss.”

Challenges that remain include a still cautious consumer population and still underwhelming global demand. Concerning factor like those threatens to temper the recover, Fisher said, adding that he envisions a “slow recovery.”

“Not a V-shaped snapback-nor even a U-shaped one-but a very slow slog as we find a more sensible and sustainable mix between consumption and savings and investment,” he warned in prepared remarks.

In addition, Fisher warned that unemployment will likely exceed 10 percent before reversing course.

At April’s FOMC meeting the vote was unanimous.

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Posted in Categories: Economy, Releases, USA.

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