WASHINGTON (AP) - Federal Reserve officials spoke with increased urgency at their last meeting about the need to provide more help for a weak U.S. economy. Many felt further support would be needed "fairly soon" unless the economy improved significantly.
The minutes of the July 31-Aug. 1 meeting don't say what step would most likely be taken. The boldest move would be to launch a new program of bond buying to try to lower long-term interest rates to encourage more borrowing and spending.
The minutes show many officials favored pushing the timetable for any increase in record-low short-term rates beyond the Fed's current target of late 2014 at the earliest. Some economists think the target will be extended to mid-2015. The minutes said Fed officials agreed to defer any action on extending the timetable until their next meeting in September.
Early reaction in the stock and bond markets was positive but muted. The price of gold, which traders sometimes buy as a hedge against inflation, jumped about $10 an ounce, to $1,650, its highest point since early May.
The minutes released Wednesday cover the July 31-Aug. 1 policy meeting. The Fed releases the minutes of its private discussions three weeks after each meeting. The policy committee will next meet Sept. 12-13.
After its August meeting, the Fed announced no changes in its policies. But in a statement afterward, it appeared to signal a growing willingness to take further steps to boost the economy if it doesn't improve. The Fed noted that growth had slowed in the first half of the year. In particular, it pointed to lackluster job growth and consumer spending.
The issue of whether the Fed will announce any major moves in September has been thrown into doubt by economic improvements since the its last meeting. Gains have been made in such areas as hiring, housing and consumer spending.
Many analysts are looking to a speech by Chairman Ben Bernanke on Aug. 31 at an annual Fed conference in Jackson Hole, Wyo., to provide more guidance on any new steps.
Many economists think the Fed will want to delay any announcement of further bond purchases until after its September meeting. The Fed has already tried to drive down long-term rates by buying more than $2 trillion in Treasury bonds and mortgage-backed securities. The goal has been for those lower rates to help boost spending, hiring and economic growth.
In the view of many, the Fed needs to put off any major new bond-purchase program so it would have something in reserve in case the economy goes off a "fiscal cliff" at the end of the year. That's when tax increases and deep spending cuts will take effect unless Congress reaches a budget agreement.
On Wednesday, the Congressional Budget Office warned that if Congress fails to act, the fiscal cliff would probably tip the U.S. economy into a recession next year. The CBO estimated that the economy would shrink 0.5 percent in 2013- a bleaker picture than it sketched earlier this year. Unemployment would rise to around 9 percent by late next year as a result of the spending cuts and tax increases, the CBO said.
Another factor that argues for avoiding any major action at the September meeting is the division within the Fed. Some officials favor providing more support soon. An opposing faction contends that the Fed has already done all that it can to boost growth and that any further efforts will run the risk of igniting inflation.
In a speech this week, Dennis Lockhart, president of the Atlanta regional Fed bank and a voting member of the Fed's policy committee, said, "there was a risk to monetary policy being employed too aggressively and without effect to address economic problems that can be resolved" only if Congress makes necessary tough decisions on taxes and spending.
Another voting member on the policy committee, Jeffrey Lacker, head of the Richmond Federal Reserve Bank, cautioned in an interview with The Associated Press last week that the Fed has limited ability to deliver more help to the economy now. Lacker said the Fed can do only so much to lower the unemployment rate from its current 8.3 percent.
Lacker has cast a lone dissenting vote at each of the Fed's five meetings this year. He has objected to a Fed program to sell short-term Treasurys and buy longer-term Treasurys and to the Fed's plan to keep short-term rates at record lows until at least late 2014.
But other Fed officials remain supporters of further Fed actions, arguing that inflation is not a threat while unemployment remains elevated and has improved only slowly.
The minutes acknowledged this group's arguments. It says: "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."
Even though recent reports show the economy has strengthened a bit, many analysts expect growth to stay too weak to lower unemployment much.
The economy grew at a lackluster annual rate of 1.5 percent in the July-September - even slower than the 2 percent growth rate turned in from January through March. Many economists think growth in the second half of this year will remain around 2 percent.