MercoPress. South Atlantic News Agency

Minutes confirm Fed ready to purchase more government bonds to prop economy

The only dissenting voice Thomas Hoeing is more optimistic about the US economy recovery

United States Federal Reserve will buy up more debt if the outlook worsens “appreciably”, minutes from its August meeting have revealed. The central bank preferred to purchase US government bonds, but did not rule out buying further mortgage debts.

The Fed has already bought 1.4 trillion US dollars of mortgage debt in its efforts to stimulate the economy. The minutes also showed that one of committee member voted against keeping its investment at this level.

At the meeting, the Fed voted that repayments it received on the mortgage debts it held should be reinvested in US government bonds.

The only member to vote against further unconventional measures was Thomas Hoenig of the Kansas City Fed. He is more optimistic about the US economic recovery, and expressed concerns that the Fed's actions could lead to new financial market bubbles.

The Fed has already cut interest rates to within a whisker of zero, forcing it to resort to more unusual market interventions in order to boost the economy.

The minutes contained little information that was not already known from a speech given by the Fed's chairman, Ben Bernanke, last week.

In that speech Mr Bernanke, considered two other unconventional options besides buying debt: committing to keep rates at zero for a longer period of time, and paying zero interest on banks excess reserves with the Fed.

He indicated that both options were problematic, but could be employed if the economy worsens further. A fourth option - raising the Fed's inflation target above 2% - he ruled out altogether. (BBC).-