Several members of the Federal Reserve suggested during a June policy meeting that further efforts to boost the economy might soon be needed.
Minutes from the last meeting of the Federal Open Market Committee (FOMC) released Wednesday reveal that a handful of its 12 members said further policy steps would "likely" be needed to push the economy in the right direction. "Several others" agreed that the Fed would need to do more for the economy if the recovery were to lose steam or additional threats to the economy were to arise.
When the Fed officials met in June, they agreed to hold off on any major new efforts to boost the economy. Instead, they opted to keep interest rates near zero, and extend a portfolio emphasis on longer-term securities known as "Operation Twist."
However, the minutes indicate that officials see the economic recovery as gradually slowing, and are mulling ways the central bank could step in to help.
Fed officials noted that "a variety of indicators showed smaller gains than had been anticipated," especially on the jobs front.
In particular, markets have been on high alert for any signs the Fed is considering a third round of massive bond purchases known as "quantitative easing."
At the last meeting, a few Fed officials said it would helpful if the central bank could determine how large a third round of purchases would need to be before they began to distort financial markets.
The minutes indicate that officials see the economic recovery as losing strength, as officials expect the economy to grow and unemployment rate to fall more gradually than they did earlier in the year. In addition, continued concerns about the crisis in Europe, as well as the potential for U.S. fiscal policy to be "more contractionary than anticipated."
For months, Fed Chairman Ben Bernanke has called on Congress to adjust policy to avert the "fiscal cliff" coming at the end of the year, when temporarily lower tax rates and automatic spending cuts are set to take effect.
While Republicans have taken the Fed to task for recent attempts to boost the economy, warning they put the United States at risk for damaging inflation, Fed officials at their most recent meeting said inflation had actually declined recently, and stood to fall near their 2 percent goal over the longer term. However, "a few" said the Fed's current policy stance did raise risks on inflation over the medium term.