Federal Reserve policymakers appear less keen to launch a fresh round of monetary stimulus as the US economy gradually improves, according to minutes for the central bank's March meeting.
Fed officials noted recent signs of slightly stronger economic growth but remained cautious about a broad pick up in US activity, focusing heavily on a still-elevated jobless rate.
However, the minutes suggest the appetite for another dose of quantitative easing, so-called QE3, has waned significantly.
The March meeting minutes noted "a couple" of members thought additional stimulus might be needed if the economy loses momentum or inflation remains too low for too long.
That contrasted with a much broader characterization in January, when the minutes cited a few members as seeing a possible need for additional easing before long, and others thinking stimulus might be required if economic conditions worsened.
Only last week, Fed Chairman Ben Bernanke had kept alive the idea of more stimulus when he warned business economists about the risks that long-term unemployment could lead to prolonged economic malaise in the United States.Investors had interpreted those comments as suggesting Bernanke was inclined toward a third round of bond buys.
The Fed's latest message in the minutes sent a different message, which was probably the worst of both worlds for markets.
The expression of concern about the speed of recovery combined with some weakened prospects for Fed support to the economy hurt equities and bond yields moved higher as it appears less likely the Fed will begin a new round of bond purchases that would keep interest rates low.
The dollar rallied against the euro and gold declined.
"The minutes threw water on the resurrected notion that QE3 was still very much on the table," said Clark Yingst, chief market analyst at Joseph Gunnar in New York.
Still, the Fed remained sober about US economic prospects.
Members "generally agreed that the economic outlook, while a bit stronger overall, was broadly similar to that at the time of their January meeting," the minutes said.
The US economy expanded at a 3pc annual rate in the final three months of last year but is expected to have slowed to around 2pc in the first quarter of this year.
Fed officials continue to see plenty of hurdles ahead. They said that, while financial market strains had eased, they still posed significant downside risks to economic activity.
At the same time, consumer spending, a key driving force behind US economic growth, faces plenty of challenges.
"While recent employment data has been encouraging, a number of members perceived a non-negligible risk that improvements in employment could diminish as the year progressed," the minutes said.
telegraph.co.uk
Fed officials noted recent signs of slightly stronger economic growth but remained cautious about a broad pick up in US activity, focusing heavily on a still-elevated jobless rate.
However, the minutes suggest the appetite for another dose of quantitative easing, so-called QE3, has waned significantly.
The March meeting minutes noted "a couple" of members thought additional stimulus might be needed if the economy loses momentum or inflation remains too low for too long.
That contrasted with a much broader characterization in January, when the minutes cited a few members as seeing a possible need for additional easing before long, and others thinking stimulus might be required if economic conditions worsened.
Only last week, Fed Chairman Ben Bernanke had kept alive the idea of more stimulus when he warned business economists about the risks that long-term unemployment could lead to prolonged economic malaise in the United States.Investors had interpreted those comments as suggesting Bernanke was inclined toward a third round of bond buys.
The Fed's latest message in the minutes sent a different message, which was probably the worst of both worlds for markets.
The expression of concern about the speed of recovery combined with some weakened prospects for Fed support to the economy hurt equities and bond yields moved higher as it appears less likely the Fed will begin a new round of bond purchases that would keep interest rates low.
The dollar rallied against the euro and gold declined.
"The minutes threw water on the resurrected notion that QE3 was still very much on the table," said Clark Yingst, chief market analyst at Joseph Gunnar in New York.
Still, the Fed remained sober about US economic prospects.
Members "generally agreed that the economic outlook, while a bit stronger overall, was broadly similar to that at the time of their January meeting," the minutes said.
The US economy expanded at a 3pc annual rate in the final three months of last year but is expected to have slowed to around 2pc in the first quarter of this year.
Fed officials continue to see plenty of hurdles ahead. They said that, while financial market strains had eased, they still posed significant downside risks to economic activity.
At the same time, consumer spending, a key driving force behind US economic growth, faces plenty of challenges.
"While recent employment data has been encouraging, a number of members perceived a non-negligible risk that improvements in employment could diminish as the year progressed," the minutes said.
telegraph.co.uk
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