Fed Lowers Expectations for Early RecoveryThe Federal Open Market Committee's minutes of its March 17-18 meeting shows that the Federal Reserve policy-makers agreed that "substantial additional purchases" of a range of longer-term assets were needed to deal with a steep drop in economic activity across all sectors.
The minutes state the Fed's decision makers saw credit conditions remaining very tight, and financial markets remaining fragile and unsettled, with pressures on financial institutions generally intensifying in 2009. "Overall, participants expressed concern about downside risks to an outlook for activity that was already weak," the minutes state.
The Fed says the FOMC lowered projections for U.S. real gross domestic product in the second half of 2009 and 2010; however, the published minutes did not show revised figures.
The FOMC says these revisions reflect the steep job losses across nearly all sectors and contracting industrial production, and showed real GDP flattening out gradually over the second half of 2009 before slowly expanding in 2010 "as the stresses in financial markets ease, the effects of fiscal stimulus take hold, inventory adjustments are worked through and the correction in housing activity comes to an end."
The FOMC said it planned to buy up to $300 billion of longer-term U.S. Treasury securities and an additional $850 billion of agency mortgage debt to ease a deepening domestic recession.