Fed Was Actually Considering More Quantitative Easing in August

The central bank ultimately decided to keep interest rates super-low

On August 9, a day after the stock market plunged following a U.S. credit rating downgrade, the Federal Reserve announced that it would keep interest rates near zero through mid-2013 to calm Wall Street down and energize the struggling economy. That decision was arrived at after the Federal Reserve ruled out several other options, according to minutes released today from the central bank's most recent policy meeting. Some officials suggested a third round of asset purchases, or "quantitative easing," The Wall Street Journal explains, while others recommended "extending the average duration of the Fed's existing portfolio by selling bonds with short maturities and buying those with longer maturities." The paper adds that there was only minimal support for lowering the interest rate banks get for reserves they keep with the Fed and that a minority of Fed officials advocated using none of the tools at the Fed's disposal.

The Journal surfaces some worrying insights from the meetings as well. Three out of 10 voting officials dissented with Ben Bernanke's decision to keep interest rates low for two years, amounting to the "stiffest internal opposition a Fed chairman has ever confronted in nearly 20 years." The paper also notes that Fed official were pessimistic about economic growth, unemployment reduction, and the fundamentals of the U.S. economy. Still, The New York Times observes, the participants didn't go so far as to say the economy is on the verge of another recession, though some claimed that "with the recovery still somewhat tentative, the economy was vulnerable to adverse shocks."