The Federal Reserve is losing patience with the pace of the fragile U.S. economic recovery, according to the minutes of the their most recent policy meeting.
Many members of the Federal Reserve say additional monetary policy accommodation is likely warranted unless the economy improves substantial. This may open the door for another round of quantitative easing measures at their next meeting in September.
The Fed said information reviewed at the July 31-August 1 meeting indicated that economic activity increased at a slower pace in the second quarter than earlier in the year and that labor market conditions had improved little in recent months.
Consumer spending was tepid as the unemployment rate stayed above 8 percent.
Policymakers also expressed concerns that manufacturing production slowed significantly in the second quarter following a large gain in the first quarter.
And although the housing market has improved a bit, the Fed seems prepared to jump-start the economy with additional asset purchases. The longer the recovery proceeds at a snail's pace, the more susceptible the economy will be to external shocks such as the European sovereign debt crisis.
Making matters worse, the uncertainty about taxes and spending is already harming the economy. Congress must back away from the so-called "fiscal cliff" of automatic tax increasing and spending cuts or risk sparking another recession, the Fed warned.
A number of officials want to extend the central bank's promise to keep interest rates exceedingly low by another year to 2015. However, most want to defer a decision on forward guidance until the Fed has a better chance to assess the benefits of its Operation Twist program.
Earlier this year the Fed embarked on Operation Twist -- buying longer-term Treasuries and simultaneously selling some of the shorter-dated issues -- in an effort keep real interest rates as close to zero as possible.
by RTT Staff Writer
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