WASHINGTON, June 27 (Reuters) -
The U.S. Federal Reserve's
policy-setting panel in May saw
some risk that the economy's
expansion could be muted but also
said a pause in growth was not
unusual early in a recovery,
according to meeting minutes
released on Thursday.
"The members weighed the
possibility that the expansion
could be relatively subdued for a time, damping prices and failing to
reduce margins of underutilized resources," according to the minutes of
the May 7 meeting of the Federal Open Market Committee (FOMC).
Despite that possibility, though, FOMC members were still betting on an
acceleration in growth later, the minutes said.
"A pause in the expansion was not an unusual development during the
early stages of a cyclical recovery, and the members generally viewed a
pickup in growth as a reasonable expectation," according to the
minutes.
The FOMC voted 10-0 to leave rates unchanged at the meeting. On
Wednesday, the FOMC again voted unanimously to leave short-term
rates steady, saying an earlier boost to economic growth from
inventories and demand had moderated.
In May, the FOMC decided to leave rates unchanged because"a firming
of policy at this time would be premature and would incur an undue risk
to a healthy expansion."
According to the minutes, inflation pressures were seen as subdued and
expected to remain that way for some time. As a result, the FOMC
members thought there would be"adequate opportunity to evaluate
ongoing developments and tighten policy as needed later."
While the economy grew at a blistering 6.1 percent in the first quarter
of 2002, its pace is thought to have slowed to at least half of that in
the second quarter.
That slowing, combined with jitters in the stock markets over corporate
governance issues, has raised questions about the strength of the
recovery. Still, most analysts think the Fed will likely raise short-term
rates near the end of the year to head off potential inflation.
While the FOMC members said household spending was
"well-maintained," their focus continued to be on the corporate side,
where lagging investment dragged the economy into recession in March
2001.
"The members generally viewed business fixed investment as the key
sector that would determine the strength of the expansion," according
to the minutes.
The FOMC members saw a"sluggish and delayed" upturn eventually, but
noted a"persistently gloomy business sentiment" as a possible
obstacle.
Washington's attempt to help out earlier this year with the passage of a
stimulus bill meant to encourage firms to buy new equipment was
having little effect to date, the Fed minutes said. While it was expected
to provide some boost ahead,"the legislation appeared to have little
effect thus far," according to the minutes.
Quelle: Reuters
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