Among further easing
steps likely to be discussed are the possibility of extending the duration of the bonds it buys to five or 10 years and the purchasing of riskier financial assets such as exchange-traded funds and real estate investment trusts.
In July and August the French franc, Italian lira, and other major European currencies strengthened against the mark, benefiting from a combination of factors, including expectations of gradual monetary easing
in Germany, continued investment shifts into higher-yielding markets, greater seasonal tourism flows into southern European countries, and modest optimism of fiscal tightening in most European countries.
In the staffs judgment, the prospects for some further easing
of pressure on labor and other resources suggested that price inflation likely would not deviate significantly from recent trends.
There was concern that an increase in the M2 range could foster a misreading of the Committee's intentions, especially if some easing
in policy were to be approved during this meeting, explanations of the technical reasons notwithstanding.
Declines in interest rates in foreign countries were widespread, reflecting signs of greater economic weakness as well as actual or prospective easing
in monetary policies abroad.
economy and consequent market anticipation of an easing
recovery than had been anticipated and to expect further easing
Nonetheless, many of the members felt that the behavior of M2 and M3, whose growth for the year to date was at the bottom of the Committee's ranges, needed to be monitored with special care and, at least in one view, that some further easing
measures might be desirable in the near term to improve the prospects that monetary expansion for the year would be within the Committee's ranges.
However, the System's earlier easing
actions, including the most recent reduction in the discount rate in late April and some associated easing
in reserve conditions, had provided a good deal of insurance against cumulative further weakening in business activity.
Canada and the United Kingdom were already embarked on a path of monetary easing
in the face of severe recessions.
Late in the intermeeting period, after the two cuts in the discount rate and the monetary easing
through open market operations, the federal funds rate averaged a little above 6 1/4 percent.
At its meeting on November 13, the Committee adopted a directive that called for a slight immediate reduction in the degree of pressure on reserve positions and that also called for giving weight to potential developments that might require some slight further easing
during the intermeeting period.
At its meeting on August 21, the Committee adopted a directive that called for maintaining unchanged conditions of reserve availability, at least initially, in the intermeeting period ahead and that provided for giving emphasis to potential developments that might require some easing
later in the period.
The latest data on labor compensation suggested no easing
of labor cost pressures.
In the final days of July, evidence was widespread that the Federal Reserve had responded to a slackening of economic growth and price pressures by easing
monetary policy, and the dollar declined.