Yesterday, the Federal Reserve released minutes from the September 21, 2010 meeting of the Federal Open Market Committee (FOMC). As anticipated, the minutes reveal concern about the sluggish economic recovery, as the Federal Reserve staff lowered its projections for economic growth in the second half of 2010 and in 2011 and predicted that overall inflation would “remain subdued,” and internal debate about when, if ever, it would be appropriate for the Federal Reserve to “provide additional monetary policy accommodation.”

After receiving staff reviews of the current economic situation, financial situation and economic outlook, the minutes generally conclude that “the pace of recovery in output and employment has slowed in recent months.” The FOMC determined “to leave unchanged the level of the combined holdings of Treasury, agency debt, and agency mortgage-backed securities,” preferring to accumulate additional information before reaching a decision about providing additional monetary stimulus. The members of the FOMC did agree to continue to maintain the target range of 0 to 1/4 percent for the federal funds rate and they continue to anticipate that “economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, [would] likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

The minutes indicate that the FOMC “discussed several possible approaches to providing additional accommodation but focused primarily on further purchases of longer-term Treasury securities and on possible steps to affect inflation expectations.” The state that the FOMC “will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate” to promote price stability and maximum employment by, for example, “targeting a path for the level of nominal GDP.”