Fed minutes report "alternative actions" to stimulus

Nov. 20 (UPI) -- The Federal Reserve continues to support the economy through its stimulus program, but it's developing an alternative outlook, according to the twice-yearly report by the Federal Open Market Committee.

Fed Chairman Ben Bernanke, who instigated and supported the policy, said Tuesday that the Fed would not ease its stimulus, foreshadowing Wednesday's release. And Wednesday's release noted that though the stimulus continues, it might not be for much longer.

The FOMC minutes also indicate that the Fed is committed to rebounding the economy and seeking ways to do so outside of its current stimulus program.

Increased transparency from the Fed is said to buffer the transition for the next chairman, who is nominated to be Janet Yellen. Both Yellen and Bernanke have announced a continuation of the Fed's controversial bond-buyback program, stimulating the economy with $85 billion monthly, raising the Fed's balance sheet to $3 trillion.

Yellen last week told Congress that the program has risks, but is necessary to continue to hold up the economy, which is not showing strong enough progress for the Fed to pull back. She also said the program can't last forever, and economists expect it to start dwindling down in March.

The goal is to push the jobless rate to 6.5 percent, the minutes reported. It is now at 7.3 percent. The Fed's dual mandate is to control unemployment as well as interest rates.

As markets respond heavily to the Fed's news, the minutes reported that the Fed looks to "offset the effects of reduced purchases" through "alternative actions." The Fed looks to cut back bond-buying that's pushing money into the economy while controlling a rise interest rates.

Short-term interest rates are to remain close to zero, so long as inflation doesn't rise past 2.5 percent.

Inflation currently hangs below the Fed's 2 percent goal. Economists, investors and government officials have questioned the Fed regarding the impact of low interest rates on the economy, but the Fed has noted that inflation is not currently a primary concern.

Fed officials still have a lot to agree on before announcing the shift in policy, including the unemployment rate threshold and how to buffer the economy as the stimulus dwindles.

[Wall Street Journal] [Washington Post] [Bloomberg]