Fed: Additional Monetary Stimulus Warranted ‘Fairly Soon’
According to the minutes of the July 31 FOMC meeting, many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.
A number of the members indicated that additional accommodation could help foster a more rapid improvement in labor market conditions in an environment in which price pressures were likely to be subdued. Several members noted the benefits of accumulating further information that could help clarify the contours of the outlook for economic activity and inflation as well as the need for further policy action. One member judged that additional accommodation would likely not be effective in improving the economic outlook and viewed the potential costs associated with such action as unacceptably high. At the conclusion of the discussion, members agreed that they would closely monitor economic and financial developments and carefully weigh the potential benefits and costs of various tools in assessing whether additional policy action would be warranted.
The Fed also noted in the minutes that real business expenditures on equipment and software rose in the second quarter at a faster pace than in the first quarter. However, new orders for non-defense capital goods excluding aircraft decreased last quarter, and the backlog of unfilled orders decelerated sharply. Other recent forward-looking indicators, such as surveys of business conditions and capital spending plans, also suggested that increases in outlays for business equipment would slow in coming months.
In their discussion of monetary policy for the period ahead, members agreed that it would be appropriate to keep the target range for the federal funds rate at 0 to 0.25% and anticipate that economic conditions are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
To read the full minutes from the July 31 FOMC meeting click here.