By Jeannine Aversa
AP Economics Writer
WASHINGTON (AP) -- A new program to pump up the economy through the purchase of government debt dominated Federal Reserve officials' discussions at their September meeting.
Minutes of the closed-door deliberations, released Tuesday, suggest Federal Reserve Chairman Ben Bernanke and his colleagues were closing in on a consensus to launch such a program.
Members, however, didn't settle on how big it should be or how to structure it. Such details are what Fed officials are currently wrestling with as their prepare for the next meeting on Nov. 2-3. Economists predict Fed officials will decide on that program at that meeting.
The Fed's purchase aims to drive down interest rates on mortgages, corporate debt and other loans. It hopes that this will spur Americans to boost spending, which would strengthen the economy and ultimately chip away at stubbornly high unemployment.
Public remarks by Fed officials since the September 21 meeting suggest the program will be smaller than the $1.7 trillion one it launched during the recession. Under that program, the Fed purchased a mix of mortgage securities and government debt. The effort was credited with forcing down mortgages rates and providing support to the crippled housing market.
At the September meeting, some Fed officials thought that the economic benefit of a new program could be "small." A smaller program isn't expected to lower rates as much as the Fed's crisis-era program did, economists say. Moreover, there's concern that even cheaper loans will fail to get people and companies to ramp up their spending. Thus far, they haven't been confident enough in the economy or their own financial prospects to do so.
Published: Fri, Oct 15, 2010
