Fed warns of sluggishness

Marion Dakers
US POLICYMAKERS warned of increasing risks to economic growth in the minutes of the Federal Open Markets Committee (FOMC) meeting released yesterday.

“The softer tone of incoming economic data suggested that the pace of the expansion would be slower over the near term than previously projected,” the minutes said.

The Fed decided to reinvest the proceeds of mortgage-backed securities into safer Treasury bonds in a meeting on 10 August, though some members worried the move would send inappropriate signals to investors about the likelihood of further quantitative easing and the state of the economy.

Ben Bernanke and other particpants agreed during the five-hour meeting that the Fed could not rule out future investment in mortgage-backed securities.

Members said loans to households and small firms showed slow signs of improvement, and maintained that growth would pick up in 2011.

Low interest rates are likely to continue for an “extended period” until economic conditions improve.

Only Thomas Hoenig, who has disagreed with the Fed’s interest rate policy for four months, voted against the decision.