Fed Minutes: Bernanke Remains Cautious, No More Quantitative Easing For Now

The U.S. Federal Reserve is split on whether to open up a third round of bond purchases to boost the sluggish recovery, according to minutes from the central bank’s January 24-25 meeting.

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The minutes show that some Fed officials though such bond purchases should begin soon, while unemployment remains high and inflation low, while others said such a step should only be taken if and when it the economy weakens further, or if inflation stays below the Fed’s target rate of 2 percent.

We already know that, at its last meeting, the Fed voted in favor of holding its benchmark interest rate at record lows until at least late 2014, but apparently one Fed official argued that the central bank might need to consider abandoning that plan in order to keep inflation low.

Chairman Ben Bernanke said at a news conference following the January meeting that the Fed had not yet ruled out a third round of bond buying, though he could not say if or when one might be warranted.

The Fed’s next meeting is on March 13, but few economists believe Bernanke will announce a new bond buying program then, as the outlook for hiring, and for the broader economy, is looking better since the Fed’s last meeting. The national unemployment rate dropped two-tenths of a point in January to 8.3 percent.

In fact, most analysts believe positive economic reports have pushed a possible round of bond buying further in the future, as the Fed considers such a move a last-ditch measure. Some believe that, unless there is a major shock to the U.S. economic, which would most likely be the result of Europe’s debt crisis, that the Fed will not go forward with more bond purchases.

Still, Bernanke did tell a Senate panel last week that unemployment figures are not necessarily adequate gauges of improvement in the job market, as the jobless rate doesn’t factor in the millions of Americans who have simply stopped looking for work.

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To contact the reporter on this story: Emily Knapp at staff.writers@wallstcheatsheet.com

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