Members of the Federal Open Market Committee said at its latest meeting the U.S. remained on a path of moderate economic growth, though members seemed more willing to introduce another round of easing if the economy sputters.
Minutes released Wednesday from the April 24-25 meeting signaled a committee mostly positive about the U.S. economy. Many indicators, including jobs and consumer spending, improved, and the FOMC raised its forecast for 2012 GDP to grow between 2.4% and 2.9%.
But worries over Europe and budget balking in Washington could potentially push the economy downward, members said.
If the recovery loses momentum, “several members indicated that additional monetary policy accommodation could be necessary,” according to the minutes.
At its previous meeting March 12-13, just “a couple members indicated that the initiation of additional stimulus” could be needed.
Despite this change, Paul Ashworth, chief U.S. economist at Capital Economics, said he still doesn’t expect further quantitative easing, unless Greece’s troubles significantly rock the world economy.
“We’ve gone from a ‘couple’ to ‘several’ voting members … from two out of 10 to probably four out of 10,” Ashworth wrote in a research note. “Still not a majority and still only if the recovery fades, but it does represent a shift in the chances of QE3.”
Some FOMC members expressed further confidence in an economic recovery on those positive indicators, though others said readings “may partially reflect the effects of the mild winter weather,” according to the minutes.
If Democratic and Republican party leaderships can’t agree on a plan for the next budget, “a sharp fiscal tightening could occur at the start of 2013,” according to the committee.
The view on housing remained mostly glum from members, with most expecting a slow recovery in the market. But others, according to the minutes, saw potential for faster growth in stronger buying demand and changes to the Home Affordable Refinance Program.
The FOMC elected to maintain its near-zero target for the federal funds rate through late 2014, with Richmond Federal Reserve Bank President Jeffrey Lacker the lone dissenter.
(Read the full minutes here.)