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The minutes of FOMC meeting held in June, indicate that only “a few members” thought that further stimulus would be necessary but “several others” noted that additional stimulus would be needed if “economic recovery were to lose momentum and if the downside risks to the forecast became sufficiently pronounced”.

Some members thought “the recent weakness in a variety of economic indicators was more likely to prove transitory and that the outlook beyond this year was essentially unchanged”.

Most members were concerned about the situation in Europe, still-depressed housing market, tight credit availability and the fiscal tightening in the U.S. but they expected that most of these factors would “ease over time and recovery would eventually gain strength”.

Many members noted that consumer spending was holding up and expected the spending to pick up further due to decline in gas prices.

Most members were concerned that “a sharp tightening of fiscal policy would occur at the start of 2013” if the issues of expiring tax cuts and spending reductions were not addressed soon.

Regarding the labor markets some participants thought that the unemployed rate was being substantially boosted by structural factors such as mismatches between the skills of unemployed workers and those required for available jobs.

While all members except one had agreed to extend the “Operation Twist”, some members thought that the continued purchases of long term, Treasury bonds could lead to  deterioration of the functioning of the Treasurys market and also undermine the intended effects of the policy.

The June jobs report had added to market expectations that Fed will have to do “something more” soon. In the past few days, some of the Fed officials have spoken in favor of additional monetary accommodation.  

But the minutes have failed to provide any further guidance on what the Fed might do to support the economy.

Do you expect another round of QE this year?

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