A divided Federal Reserve debated the outlook for the United States economy but refrained from much talk about a third round of quantitative easing, according to the minutes of the central bank's most recent policy making meeting.
At the meeting, the Fed held interest rates at effectively zero and reiterated their conditional pledge to keep rates low through late 2014.
Most participants saw the U.S. economy expanding moderately despite the "temporary" effects of higher gasoline prices.
The Fed expects energy prices to level out in the second half of this year, resulting in subdued inflation in 2012 and 2013.
In the economic projection prepared for the March FOMC meeting, the staff slightly raised its near-term forecast for real GDP growth but predicted that unemployment was expected to remain elevated through 2013.
"Participants continued to expect most of the factors restraining economic expansion to ease over time and so anticipated that the recovery would gradually gain strength," the minutes read.
The Fed cheered recent policy actions in the euro area, saying that austerity measures and emergency funding have helped reduce financial stresses and lower downside risks in the short term.
The minutes alluded to a dissenting vote from Dallas Federal Reserve President Richard Fisher, who judged that maintaining zero interest rates much beyond this year would risk runaway inflation.
On the other hand, "a couple" dovish members were worried that additional stimulus could become necessary if the economy lost momentum or if deflationary pressures develop.
The benchmark U.S. interest rate has been at effectively zero since 2008, and the Fed has twice initiated massive quantitative easing to give the economic recovery an added boost.
by RTT Staff Writer
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