If the global economy fails to grow substantially in coming months, further stimulus will be essential, says the minutes of the Fed’s July 31-Aug. 1 Federal Open Market Committee meeting.
The minutes were released today, and say, “Many members judged that additional monetary accommodation would likely be warranted fairly soon to strengthen the economic recovery.”
Read: Global investors scale back
In June, only a few members judged easing as a potential necessity, but the U.S. economy has continued to lag amid a drop in consumer spending and the deceleration of global progress.
Read: Canada to lead G7, but global recovery troubled and U.S. growth slows to 1.5%
Congressional budget analysts say the nation “could be plunged into a significant recession during the first half of next year if Congress fails to avert nearly $500 billion in tax hikes and spending cuts set to hit in January”, reports The Washington Post.
The Post adds, “The massive round of New Year’s belt-tightening— known as Taxmageddon—would disrupt recent economic progress, push the unemployment rate back up to 9.1% by the end of 2013 and produce another recession.”
Read: U.S. investor appetite returning, for more on how the U.S. is experiencing its slowest recovery since the Great Depression
To help boost the country’s recovery, many officials said launching another major bond-buying program—or round of QE—would be worth the costs and risks.
Read: Will QE be effective?
“Such a program could provide additional support for the economic recovery, both by putting downward pressure on longer-term interest rates and by contributing to easier financial conditions more broadly,” the minutes say.
Further easing measures could also boost business and consumer confidence. But, they’re holding back from immediately implementing bond buying.
The Wall Street Journal says Bernanke will give some clues about next moves in his upcoming speech in Wyoming on August 31, 2012. Following that, the Fed will hold their next meeting in mid-September.